Many companies rely on indemnification and additional insured provisions in their contracts for protection against losses arising from a contractual relationship. Indemnification provisions insulate the company from certain losses by requiring the other party to assume and to indemnify it against those losses. Additional insured provisions add another layer of protection by requiring the other party to arrange for the company to become an insured under the other party’s insurance policies. Ideally, indemnification provisions and additional insured coverage should work together when losses occur to furnish the level of protection the company expected when it entered into the contract.
Unless company representatives read the insurance policy that provides the additional insured coverage, however, they may have little idea how the additional insured coverage works. A recent decision by the Supreme Court of Texas arising out of the Deepwater Horizon oil spill incident illustrates how the interplay between additional insured coverage and wording in an underlying contract can operate to frustrate an additional insured’s expectations of coverage. Continue reading “How to Make Sure the Indemnification and Additional Insured Provisions in Your Next Contract Deliver the Protection Your Company Expects”