A strong risk management strategy involves implementation of several key elements: risk transfer, loss prevention, accident response, litigation philosophy. One commonly under-scrutinized aspect of risk management is the use of insurance requirement clauses in key contracts. It is important to know that people you're doing business with have the means to take financial responsibility for the consequences of their actions, which very often means requiring that they buy insurance. This article is the first in a three-piece series that will address insurance requirement provisions in contractual transactions. This first piece addresses the core concepts, considerations and goals for effective insurance requirement provisions. The two subsequent pieces will address best practices for drafting these provisions, and special challenges with compliance and enforcement.
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