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Risk Management

Contract Basics

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Beth Carmichael Risk Manager, Five Colleges Inc

Connecticut Conference of Independent Colleges Wednesday, June 14, 2006

Why are Contracts so Important?    Contracts put in writing the agreement between the parties – subject. time frame. etc. Contracts clarify who is responsible for what Contracts clarify how disputes will be resolved = Loss Control – we are better able to manage a loss or dispute after it occurs 2 .

penalties.Some Basics      Approval Process Who can sign? The other party’s “Standard Form” “Terms to be Provided” Undefined payment obligations e. cancellation charges. taxes. liquidated damages. interest. litigation costs.g. attorney fees 3 .

Standard Contract Provisions            Acceptance and  Limitations  Assignment  Choice of Law Compliance with Laws Conduct of Personnel  Confidentiality  Conflict of Interest  Damages  Discount Terms  Entire Agreement (changes)  Force Majeur  Freight Charges Indemnity Inspection Insurance Invoices and Payments Government Contracts Labor Disputes Limitation of Liability Packing Proprietary Rights / Ownership MSDS        No Assignment Names and Trademarks Non-waiver Notice Scope / Recitals Tax exemption Termination – – – Cause/No Cause Convenience Time limit    Timely delivery Relationship of the Parties Severability 4 .

 Side Agreements – non-insurance contracts shift liability from one party to another 5 .” Hold Harmless – “I will be responsible for claims brought against you by a third party.Liability Transfer Techniques   Exculpatory – “I will not hold you responsible for what you do to me.   One party indemnitor agrees to pay damages for the benefit of the second party who may become liable to pay damages. of any loss whose insurance carrier expected to cover it. in advance. Intent is to indicate.

Key Risk Management Clauses    Indemnity Insurance Other Key Terms – – – – – – – Choice of Laws Limitation of Liability Entire agreement (e-mail) Assignment Names and trademarks Non-waiver Severability 6 .

indemnify and hold harmless Who is indemnified: institution. operations or just negligence? Sole activities? 7 . etc. agents.Indemnity      Bilateral or unilateral Defend. volunteers. students. trustees. employees. For what? All acts.

Campus Facility Users . damages. loss or expense is caused in part by a party indemnified hereunder. assigns and students from and against claims. employees. regardless of whether or not such claim. including but not limited to attorney's fees. the (named party) will defend. officers. abridge or reduce other rights or obligations of indemnity that would otherwise exist in the absence of this agreement.Indemnity Agreement To the fullest extent permitted by Law. volunteers. guests or any other party they are responsible for. participants. agents. or from the performance of its operations or services. or any act. damage. including its current and former trustees. Such obligation shall not be construed to negate. losses and expenses. claim or loss of any of its employees. 8 . indemnify and hold harmless [legal name of College]. omission. agents. directors. volunteers. arising out of.

Insurance  Insurance – On Campus      General Liability Auto Liability Workers Compensation Employers Liability Professional Liability General Liability Professional Liability – Off Campus   9 .

000 Workers Compensation – Statutory Indemnity not limited to insurance required – This insurance requirement shall not be construed as limiting in any way the extent to which [party] may be held responsible for the payment of damages to any persons resulting from its operations or the activities of any person or persons for which it is liable.Insurance    Minimum limits $1.000.  Additional Insured status 10 .

Waivers are mutual for both parties.Waiver of Subrogation a/k/a Pre-Loss Waiver Purpose: To prevent an insurer from exercising its right of subrogation against someone whom the insured may have released from liability (WC/Property) Example: The Landlord (Lessor) may give the tenant (lessee) a waiver only to the extent that the lessor’s property policy provides coverage.   Both parties agreed that the tenant is not responsible for any damage covered by the insurance. landlord’s 11 .

 The first named insured:       is responsible for the payment of premiums is authorized to cancel the policy receives notice of cancellation makes policy changes with the insurer’s consent receives claims receives return premiums 12 . or other party or parties named in the declarations page of the policy. corporation.Named Insured  Refers to the person. partnership.

13 . the courts could rule that the policy limitations do not apply to the coverage provided an additional insured.Additional Insured   Is covered by the insurer for claims arising out of the activities of the Named insured Several problems may be faced when an additional insured is added    Dilution of insurance limits: Share limits for occurrence that results in a claim against both parties Legal defense conflicts: Pointing at the other party Providing unintended coverage: Additional insured   may be granted coverage for loss exposures the named insured does not intend to cover.

Administrative problems: A specific endorsement must be added to the named insured’s policy. This increases the administrative burden for the named insured. 14 . the other insurance provisions in each policy could be different. producer and insurer.Additional Insureds. cont’d   Other insurance conflicts: An additional insured is covered by both its policy and the named insured’s policy. The result may be costly litigation to determine the amounts paid by each policy. However.

events) Non-waiver Severability 15 .Other Key Terms for Risk Management        Choice of Laws (out of state parties) Limitation of Liability (value of contract) Entire agreement (e-mail) Assignment Names and trademarks (consultants.

Maintain the Documentation          Create a general file and keep the contract or agreement correspondence and notes Develop a tickler file for payments or renewals Develop a compliance calendar Understand your financial and operational environment Document changes needed / made Communication channels – appropriate and effective. 16 . Retain records at least seven years or longer Use your colleagues as resources.

Questions??? This presentation and accompanying materials are intended for risk management purposes and not as legal advise. Please consult with your attorney on contracting matters for your institution. 17 .

Inc. Bowditch and Dewey Attorneys Leta Finch. Higher Education Practice Arthur J. Gallagher Risk Management Services. Partner and Practice Area Leader.Thank you for joining us! And special thanks to: Vincent O’Rourke. Greg Hunter. Higher Education. New England For use of materials and clauses 18 . Arthur J. Area Executive Vice President and New England Practice Leader. Jr. Inc. Gallagher Risk Management Services. Higher Education Practice. Executive Director.