Review Contracts For Insurance Issues

While speaking with a client recently I learned that they were entering into a lease with a day care provider who wanted to use my client’s facility to run a satellite location. I requested a copy of the contract that was being drafted. My client’s attorney had done a fine job with indemnification agreements, hold harmless clauses, and the like. He also included a requirement for insurance. It didn’t go far enough though. Here are my recommendations:

–I suggest you increase the required aggregate limit of liablity insurance to at least $2,000,000 – their policy probably includes this now. If they don’t, increasing the agg to $2m will increase their premium very little. A low aggregate limit of coverage hinders your protection in the case of multiple claims.

–The liability policy should include coverage for physical and sexual abuse of a minor as well as coverage for corporal punishment. Some policies will specifically exclude such losses. You are looking for affirmative coverage in these vital areas.

–Add a requirement for workers compensation and auto liability insurance (if kids are transported at any time)

–You should require that your tenant provide a certificate of insurance showing the required coverages.

–I suggest that you mention someplace in the document that your tenant must insure their own property (toys, appliances, equipment, games, etc.) for loss by fire and other cause of loss.

The above may not be appropriate for your operation. It does, however, point to the need for your insurance adviser to review contracts you sign. At the very least, you will know how your insurance will respond to the provisions of the document.