Meghan Magruder, Tony Tatum, Shelby Guilbert
Companies routinely allocate or transfer risks by contract through the use of indemnification agreements, and by offering other companies "additional insured" status under their insurance programs. In many transactions, businesses also seek certificates of insurance from the indemnitor's insurers, assignment clauses, or other assurances that an indemnity obligation is an "insured contract."
Because indemnity agreements and insurance policies are separate contracts, and the parties to each contract are different, courts generally treat the scope of an indemnity provision in an underlying contract separately from the scope of an additional insured's insurance coverage. As ongoing litigation over BP's potential access to Transocean's $750 million insurance program for Deepwater Horizon liabilities once again confirms, transactional lawyers, corporate counsel, and risk managers must pay careful attention to the intersection between indemnity provisions and additional insured endorsements when negotiating risk allocation arrangements. A failure to do so can result in inadvertently giving away insurance coverage, or discovering that insurance coverage you thought you had obtained in a transaction is unavailable when needed.
This program will discuss best practices for allocating risks through indemnity clauses, "additional insured" endorsements, and insured contracts. The program also will describe the pitfalls associated with "certificates of insurance," discuss how additional insured issues should be addressed in mergers and other complex transactions, and will evaluate the potential impact of BP/Transocean case on corporate risk allocation strategies in the years ahead.
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