Contract Review 101

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  • Make sure you review your own policies before presenting this information, so that you can incorporate some sorority-specific policies and resources. In addition, check out the Reviewing Contracts document (http://tinyurl.com/ykhngks) at www.mjsorority.com for further information.
  • The most important part of the contract review process is to read the ENTIRE contract. When we’re reviewing contracts, we read through the whole contract and then go back and highlight any concerning or confusing language
  • Our opinion is that each entity should purchase insurance coverage to protect themselves from claims arising out of their own negligence. The clauses sited in the previous slides create an imbalance in terms of negligence because they force your organization to take on more liability for claims that may arise that are outside the realm of your control. For this reason, we are leery when our clients sign contracts whenever problematic verbiage is included.
  • Contract Review 101

    1. 1. Contract Review 101 From an insurance perspective © MJ Sorority, December 2010 DISCLAIMER: Please refer to your own organization’s policies regarding contract review in addition to this information. We will only discuss concerns from an insurance perspective in this presentation.
    2. 2. Step 1: Read the entire contract © MJ Sorority, December 2010
    3. 3. © MJ Sorority, December 2010 Thoroughly read all your contracts. I really mean thoroughly. “ ”
    4. 4. Step 2: Highlight any of the following verbiage <ul><li>“ naming the venue as an additional insured” </li></ul><ul><li>“ which insurance shall be primary and noncontributory” </li></ul><ul><li>“ the [fraternity/sorority] agrees to be responsible for all liquor law liability resulting from the event” </li></ul><ul><li>“ hold harmless” </li></ul><ul><li>“ indemnify” </li></ul><ul><li>“ protect, defend” </li></ul><ul><li>“ primary insurer/insurance” </li></ul><ul><li>“ venue assumes no responsibility for any and all injury or property damage” </li></ul>© MJ Sorority, December 2010
    5. 5. © MJ Sorority, December 2010 Insurance language can be very overwhelming and confusing. The next few slides attempt to make contract verbiage a little less complicated.
    6. 6. <ul><li>Add•it•ion•al In•sured </li></ul><ul><li>Adding an individual or organization as an additional insured to an insurance policy means that they have coverage under your policy for defense if there is a lawsuit. Defense costs of a claim can easily exceed the actual cost of the judgment. </li></ul><ul><li>A person or organization that enjoys the benefits of being insured under an insurance policy, in addition to whomever originally purchased the insurance policy. The Additional Insured pays no premium to the insurance company for this additional coverage. </li></ul><ul><li>Most often it applies where the original named insured needs to provide insurance coverage to additional parties so that they enjoy protection from a new risk or exposure that arises out of the original named insured's conduct or operations. An additional insured often gains this status by means of an endorsement added to the policy. </li></ul><ul><li>The Additional Insured is covered by the same provisions of the insured’s policy and would be subject to any exclusions that would apply. </li></ul><ul><li>Hold Harm•less </li></ul><ul><li>Provision in an agreement under which one or both parties agree not to hold the other party responsible for any loss, damage, or legal liability, thus eliminating the opportunity to be sued for your actions. See also indemnity clause. </li></ul><ul><li>The individual or company being held harmless applies whether the insured has insurance coverage for the exposure in question or not. </li></ul>Now for some “insurance-ese” © MJ Sorority, December 2010
    7. 7. “ Insurance-ese” continued… <ul><li>In•dem•ni•fy </li></ul><ul><li>Provision in a contract under which one party (or both parties) commit to compensate the other (or each other) for any harm, liability, or loss arising out of the contract. </li></ul><ul><li>The individual or company being indemnified applies whether the insured has insurance coverage for the exposure in question or not. </li></ul><ul><li>Pri•mar•y Add•it•ion•al In•sured </li></ul><ul><li>Occasionally, a contract broadens the typical additional insured definition and requirea that your policy be primary and noncontributory with any other insurance coverage that the individual or organization has. The intent here is clear: the individual/organization with whom you are contracting is attempting to make your insurance pay entirely for any claim, no matter who is at fault. This significantly increases your risk of a claim and many insurance companies will not agree to such wording. Those that do often charge extra premium for the increased exposure to risk. </li></ul>© MJ Sorority, December 2010
    8. 8. Negligence © MJ Sorority, December 2010
    9. 9. A few claim scenarios to help us understand what all this insurance jargon means: <ul><li>Sally Smith, Chapter Social Chair, signs a </li></ul><ul><li>contract with the Taproom Bar & Grill for an </li></ul><ul><li>upcoming chapter social event. The contract </li></ul><ul><li>that Sally signed obligated the chapter and </li></ul><ul><li>Sorority to list the Taproom Bar & Grill as an </li></ul><ul><li>Additional Insured for the event. </li></ul><ul><li>During the event, two non-member guests get in a fight </li></ul><ul><li>and one of the guests is severely injured. </li></ul><ul><li>The injured guest sues the instigator of the fight, the Taproom Bar & Grill, </li></ul><ul><li>and the Sorority, as a sponsor of the event. However, because the contract </li></ul><ul><li>obligated the Sorority to add the Taproom onto their policy as an Additional Insured, </li></ul><ul><li>the Sorority will take on a larger share of the liability from the claim. It will be up to a </li></ul><ul><li>judge and jury to decide how the liability should be split, but the Sorority’s policy will be </li></ul><ul><li>expected to spend the money to also defend the venue. </li></ul>© MJ Sorority, December 2010
    10. 10. <ul><li>Sally Smith, House Corporation President, signs </li></ul><ul><li>a contract with Connie of Connie’s Construction </li></ul><ul><li>obligating the Sorority to add the contractor </li></ul><ul><li>onto the Sorority’s policy as a primary additional </li></ul><ul><li>insured. </li></ul><ul><li>Among other projects, Connie installed a chandelier in </li></ul><ul><li>the foyer of the chapter house. The chandelier was not </li></ul><ul><li>installed properly. It fell from the ceiling, </li></ul><ul><li>and, in the process, injured several </li></ul><ul><li>chapter members. </li></ul><ul><li>Common sense would dictate that the contractor would be responsible for </li></ul><ul><li>any property damage and bodily injury that resulted from the contractor’s finished </li></ul><ul><li>work. In this case, however, because the contract obligated the Sorority to add Connie’s </li></ul><ul><li>Construction onto the Sorority’s policy as a primary additional insured, the Sorority is on the </li></ul><ul><li>hook for the property damage and bodily injury caused by the faulty chandelier installation. </li></ul>A few claim scenarios to help us understand what all this insurance jargon means: © MJ Sorority, December 2010
    11. 11. <ul><li>Sally Smith, Chapter President, signed a contract </li></ul><ul><li>with the local Holiday Inn for the chapter’s </li></ul><ul><li>spring formal. The contract language read, “the </li></ul><ul><li>lessee agrees to indemnify, protect, defend and </li></ul><ul><li>hold harmless the Holiday Inn from any and all </li></ul><ul><li>claims, actions, damages, and expenses arising from, </li></ul><ul><li>relating to, or in conjunction with the event.” </li></ul><ul><li>During the event, one of the chapter members slipped </li></ul><ul><li>on the floor and broke her leg in several places because </li></ul><ul><li>one of the Holiday Inn employees had spilled a pitcher </li></ul><ul><li>of water on the floor. </li></ul><ul><li>Typically, the hotel would be responsible for its employees’ actions. In this situation, </li></ul><ul><li>however, the attorneys involved in the claim would review the contract and find that the Sally, as </li></ul><ul><li>an agent of the Sorority, had indemnified the Holiday Inn from any and all claims . </li></ul>A few claim scenarios to help us understand what all this insurance jargon means: © MJ Sorority, December 2010
    12. 12. Step 3: If any of the concerning verbiage from the previous slides is in the contract, contact MJ Insurance. Ruth Knauer Assistant Account Manager [email_address] Toll-Free: (888)442-7470 (ext. 7585) Direct: (317)805-7585 Via our website: www.mjsorority.com © MJ Sorority, December 2010 If you are not sure if any concerning verbiage is present in your contract, contact Ruth. She will be happy to review the contract for you.
    13. 13. Step 4: If the contract requires you to provide proof of insurance or a Certificate of Insurance, contact Ruth Knauer at MJ Insurance. <ul><li>If you would prefer to contact Ruth directly, please </li></ul><ul><li>provide her with the following information: </li></ul><ul><li>Fraternity/Sorority and Greek Chapter Name </li></ul><ul><li>Date of the event </li></ul><ul><li>Type of event (i.e. Philanthropic, Social, Chapter-Oriented, etc.) </li></ul><ul><li>Whether or not alcohol is being served (if alcohol is being served, who is serving the alcohol?) </li></ul><ul><li>Name and address of the venue and/or individual requesting the Certificate of Insurance </li></ul><ul><li>The contact information and preferred contact method (i.e. e-mail, fax, etc.) for the individual to whom the Certificate should be sent </li></ul><ul><li>If the venue is requesting Additional Insured status, please forward the contract immediately to us for review. </li></ul><ul><li>Ruth reviews each request on a case-by-case basis in order to best serve our clients’ needs. For that reason, please allow two weeks for any Additional Insured requests. </li></ul>© MJ Sorority, December 2010 The easiest and most efficient way to request a Certificate of Insurance is to complete the Certificate Request Form at www.mjsorority.com.
    14. 14. Please contact us with any questions or suggestions you might have. © MJ Sorority, December 2010

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