a Hilb, Rogal and    Hamilton Company
--Partners in Practice--
RISK MANAGEMENT ADVISORY	JANUARY 1996

If your client is damaged by the negligence of one of your subconsultants, it is you who will be asked to answer for the harm. From your client's point of view, recovery from your subconsultant is your problem. If that subconsultant is properly insured, recovery may well be forthcoming. But, in all likelihood, you will have to defend yourself until responsibility for the damages is sorted out. You may or may not be in a position to recover your costs after the smoke has cleared.

There are remedies for this. First and foremost, you will want to require your subconsultants to maintain adequate insurance protection and to extend that protection to you, where appropriate. Then, you will want to make clear to all who may have cause to question it later that your mutual intent from the outset was precisely that. In other words, you will want to secure a generally insurable indemnification agreement.

The attached, model contract provision, "Insurance and Indemnification Requirements for Subconsultants," is designed to help you address these issues in your prime/subconsultant agreements. You may want to consider these to be minimum requirements, and you will want to make certain that they are consistent with the obligations you assume in your own agreements with your clients. You may also want to modify them to reflect unique conditions affecting your practice. Review them with counsel and with your insurance advisor. He or she can help with the changes.

The insurance requirements contained in the model provision are reasonable, and they can easily be met by most subconsultants. Professional liability limits may be an exception. In principle, they should be at least as high as the limits you carry. Unfortunately, this is not always possible or practical. But, by requiring what you consider to be a minimum level of protection, you force the issue to the table for discussion. If a subconsultant responds with a request that you accept lower limits, you have the opportunity to make an informed decision as to whether the benefits of working with that particular subconsultant on that particular project outweigh the added risks involved.

The indemnification included in the model provision are, with the exception of willful misconduct, fully insurable, and they, too, are reasonable. You could accept them if you were pressed by your own client to do so, and there is no reason your subconsultants should not. Willful misconduct? It is difficult to argue against a responsibility to protect others against the consequences of one's own, intentionally wrongful acts.

Once you establish your requirements, you will want to monitor compliance. This is not a difficult administrative task, but it may require a certain amount of training and the preparation of a few, simple, form letters. We can help here, as well.

The insurance and indemnification model can serve another useful purpose. It provides a benchmark against which you can measure obligations your clients seek to press upon you. There are a few additional concessions you can make, and your insurance broker and attorney can advise you on this. But, on balance, the model represents the most you can reasonably deliver and the most your clients can reasonably expect.

1.0 Subconsultant's Insurance

1.1 Subconsultant shall procure and maintain, in insurance companies authorized to do business in the State of California and, except for policies issued on behalf of underwriters at Lloyds, London, assigned an A.M. Best's rating of no less than A-(IX), the following insurance coverages, written on the ISO form shown (or its equivalent) at the limits of liability specified for each:

		Commercial General Liability Insurance (ISO Form CG 0001 11/85)			$ 1 million/occurrence $ 2 million aggregate
		Automobile Liability Insurance (ISO Form CA 0001 12/90)			$ 1 million/occurrence
		Workers' Compensation Insurance			Statutory
		Employer's Liability Insurance			$ 1 million policy limit
		Professional Liability Insurance			$ 1 million per claim $ 1 million aggregate

1.2 The commercial general liability policy shall be endorsed to include the following: 1) The Prime Consultant shall be named as an Additional Insured under ISO Form CG 2010 11/85 or its equivalent; 2) the coverage afforded the Prime Consultant shall be primary and non-contributing with any other insurance maintained by the Prime Consultant; and 3) the policy shall provide for severability of interests. If not covered separately under a business automobile liability policy, the general liability policy shall also be endorsed to include non-owned and hired automobile liability.

1.3 Prior to commencing work under this Agreement, Subconsultant shall provide Prime Consultant with Certificates of Insurance evidencing compliance with the foregoing requirements, accompanied by copies of the required endorsements. Certificates of Insurance for commercial general liability automobile liability, workers' compensation/employer's liability, and professional liability insurance shall specify that the insurer shall give the Prime Consultant an unqualified (30) day's advance written notice prior to any cancellation of the policy (except in the event of non-payment of premium, in which case ten (10) day's notice shall be given).

1.4 All coverages required here under shall be kept in full force and effect for the term of this Agreement. Professional liability insurance shall be maintained for an additional, uninterrupted period of three (3) years, provided such insurance remains available to Subconsultant at commercially reasonable rates. Certificates of Insurance evidencing renewal of the required coverages shall be provided within ten (10) days of the expiration of any policy at any time during the period such policy is required to be maintained by Subconsultant here under. Any failure to comply with this requirement shall constitute a material breach of this Agreement.

2.0 Indemnification by Subconsultant

2.1 As respects the operations of Subconsultant under this Agreement other than the performance of professional services, Subconsultant shall indemnify, hold harmless, and defend the Prime Consultant and its officers, directors, and employees from and against any and all claims, liabilities, damages, losses, and costs, including but not limited to reasonable attorney's fees and other costs of defense, attributable to personal injury, bodily injury, including death, or property damage, including loss of use thereof, and arising out of or alleged to arise out of the negligence or willful misconduct of Subconsultant or anyone for whom Subconsultant is legally responsible, excepting only those claims, damages, liabilities, losses, and costs caused by the Prime Consultant's sole negligence or willful misconduct.

2.2 As respects the performance of professional services under this Agreement, Subconsultant shall indemnify and hold harmless the Prime Consultant, its officers, directors, and employees from and against liabilities, damages, losses, and costs, including but not limited to reasonable attorney's fees and other costs of defense, caused by the negligence or willful misconduct of Subconsultant or anyone for whom Subconsultant is legally responsible.
 
 

For inquiries or problems please contact us via e-mail at Earleen Thomas or call us directly at 800-705-7742.
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