Product Update

Effect of Disclaimers in Certificates of Insurance Discussed in Contractual Risk Transfer

Virtually all risk transfer techniques assume either (1) the financial ability of the party accepting the risk (the indemnitor) to undertake the indemnification it has agreed to in the contract, or (2) the existence of insurance coverage to respond to those obligations on the indemnitor's behalf. The most common method of verifying compliance with contract insurance requirements is to require indemnitors to furnish a certificate of insurance. Certificates of insurance are used to verify to the indemnitee that the indemnitor has obtained the coverages required by the contract and can also serve as proof that the indemnitee has been named as an additional insured. In 1976, various insurers and other industry groups established the Association of Cooperative Operations Research and Development (ACORD). Included in the portfolio of standard forms created by ACORD were several new certificates of insurance that contained carefully crafted disclaimers. However, two major consequences result from disclaimer language in certificates of insurance. This Contractual Risk Transfer release contains an updated and expanded discussion of the effect of disclaimers in certificates of insurance, including case law from various states that addresses the effect of such disclaimers.

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