How to read insurance requirements in a client contract

The insurance requirements in a client contract usually sit in a section or exhibit called “Insurance” or “Insurance Requirements,” often right after the indemnity clause, and they tell you four things: which policies to carry, the minimum limit for each, which endorsements the client wants, and when and how to prove it. The endorsements are where most of the detail lives, though, and the usual ones are additional insured, primary and noncontributory, and waiver of subrogation.

The way to read it is to turn every sentence into a yes-or-no question about your own policy. Do I carry this line? Is my limit at least this high? Does my policy have this endorsement? Anything that comes back “no” or “not sure” has to be settled before you sign, because signing the exhibit first and comparing it to the policy later is how gaps get locked in.

Where the requirements hide

You’ll meet these exhibits in three common places. A general contractor’s subcontract usually has the most detailed one, with limits, additional insured status for ongoing and completed work, and a “flow-down” clause making you collect the same from your own subs. A corporate client’s master services agreement might ask a two-person marketing agency or IT shop for general liability, professional liability, cyber and workers’ comp, plus a vendor portal where the certificate has to be uploaded before the first invoice is paid. And public agencies write the longest ones, which is why New York’s state contracting guidelines, with model language for nearly every line of coverage, turn up so often in this article.

But look in the indemnity section too. The promise to defend and pay for the client’s losses lives there, and it decides how much of your insurance the client is counting on.

Reading the exhibit line by line

Required policies and limits

Each line comes with a minimum limit. Here’s sample language written for this article, with illustrative figures:

“Vendor shall maintain, at its own expense: (a) commercial general liability with limits of not less than $1,000,000 each occurrence and $2,000,000 general aggregate; (b) workers’ compensation as required by law and employer’s liability of $1,000,000 each accident; (c) professional liability of $1,000,000 per claim.”

Check each figure against the matching line on your policy, which means the per occurrencePer-occurrence limitA per-occurrence limit is the most a liability policy will pay for all claims arising from a single incident, however many people are hurt or claims are filed.Read the definition limit, the aggregateAggregate limitAn aggregate limit is the most a policy will pay for all covered claims combined during one policy period, no matter how many claims you have.Read the definition, products and completed operations, and employer’s liabilityEmployer’s liabilityEmployer’s liability insurance helps pay legal costs and damages when an employee, or their family, sues your business over a work-related injury or illness.Read the definition, since employer’s liability sits on the workers’ comp row and is easy to overlook. If the contract asks for more than you carry, you don’t always need a new policy, though, since Corgi can raise limits the same day. How to choose liability limits explains how the numbers fit together.

Some contracts also require auto liability or an umbrella policy, which are separate kinds of insurance with their own policies. Workers’ comp follows state law, however, and the Department of Labor keeps a list of state workers’ compensation agencies.

Per-project aggregate

Construction contracts often ask that your general aggregate apply “per project,” so each job gets its own aggregate and a big claim on one site doesn’t drain the limit left for the GC’s job. The ACORD 25 certificate has a box for it, and San Antonio’s water utility, for one, tells construction contractors to mark the “project” box while letting other contracts mark “policy” or “location.” ISO’s CG 25 03 endorsement, listed in New York’s guidelines, is one standard way to do it. Still, ask whether your policy can carry it before you agree.

Additional insured, ongoing and completed

Contracts commonly want the client, and often the property owner and others, to be an additional insuredAdditional insuredAn additional insured is a person or company, such as a landlord or client, added to your liability policy so it can protect them from claims tied to your work.Read the definition on your general liability. The words around that phrase matter more than the phrase itself:

• “For ongoing and completed operations.” The client wants coverage while you work and after you finish, and New York’s guidelines recommend separate endorsements for each phase, such as ISO’s CG 20 10 or CG 20 38 for ongoing work and CG 20 37 for completed work.
• “On a primary and noncontributory basis.” Your policy pays first, and the client’s own insurance doesn’t share the cost. See primary and noncontributoryPrimary and noncontributoryPrimary and noncontributory is policy wording that makes your insurance pay first for a covered claim, without asking the additional insured’s own insurance to share the cost.Read the definition.
• “Endorsement to be provided.” The client wants a copy of the endorsement itself, not just a checked box.

Additional insured vs. certificate holder covers the difference in detail.

Waiver of subrogation

A waiver stops your insurer from recovering what it paid from the client after a claim, even if the client was partly at fault. Contracts may ask for one on general liability, workers’ comp and auto, and New York’s model language says that if your policy prohibits a waiver, you must get the insurer’s permission. See what is a waiver of subrogation?

Insurer and deductible standards

Some contracts go further, though, and set rules for the insurance itself. New York’s model language requires insurers with an AM Best rating of “A-“ or better and asks certificates to show the deductibles or self-insured retentions on each policy. If you’re unsure whether your policy qualifies, ask before signing instead of after.

Certificate delivery and renewals

The exhibit ends by saying when proof is due and what it has to show. Expect a certificate before work starts or before the first invoice, copies of endorsements, a fresh certificate at every renewal, and the same requirements passed down to your own subcontractors, with their certificates collected before they start. That last item is its own job, and collecting subcontractor certificates explains how to run it.

The parts that outlast the job

Now here’s what surprises people. A contract can end in June and still bind your insurance for years, and three clauses are usually responsible.

Completed operations for years after the work. Construction contracts often require you to keep products-completed operationsProducts-completed operationsProducts-completed operations is the part of general liability that covers injuries or damage caused by your finished work, or products you sold, after the job is done.Read the definition coverage in force for a set time after you finish. New York’s guidelines require it for at least three years after completion, and they add that the products-completed operations aggregate has to be at least equal to the general aggregate. In practice that means keeping your general liability active and keeping the client as an additional insured for completed work through that whole period, even if you never work for them again. The guidelines note that for most contractors this just means renewing for those three years, so the real risk is closing the business or switching insurers without checking.

Claims-made coverage after the contract. Consultants, agencies and IT firms usually see professional liability and cyber insurance requirements, and since those policies are often written on a claims-madeClaims-made policyA claims-made policy covers claims first made against you during the policy period, for work or incidents that happened on or after the policy’s retroactive date.Read the definition basis, a claim has to be made while a policy is in force. New York’s model language deals with that by requiring a claims-made policy to stay in force during the work and for three years after the contract ends, and if the policy is cancelled or not renewed in that window, by requiring the contractor to buy tail coverage, an extended reporting periodExtended reporting periodAn extended reporting period (ERP) gives you extra time after a claims-made policy ends to report claims about work done while the policy was in force.Read the definition, at its own expense. The same guidelines admit that cyber and technology errors and omissions policies generally offer tail coverage for one year at most, an honest gap between what contracts ask and what the market sells, and it’s worth raising with the client. Watch the retroactive dateRetroactive dateA retroactive date is the earliest date of work or events a claims-made policy covers, so anything that happened before it isn’t covered, even if the claim is new.Read the definition too, which some contracts require to fall on or before the contract start, and occurrence vs. claims-made policies explains why.

Additional insured on professional liability. New York’s guidelines say additional insureds can’t be added to a professional liability or errors and omissions policy, because the client doesn’t perform the professional services that policy is built to cover. If an MSA asks for it, ask the client to strike it. It’s a request you can’t meet, and saying yes anyway only moves the problem to the day the client checks.

Each of those three can outlast the contract, though, so reading the exhibit once at signing won’t cover you. Note the end date of every post-contract obligation somewhere you’ll see it at renewal.

A subcontract exhibit, decoded

A checklist to compare against your policy

Copy the contract’s insurance section and go line by line:

1. Lines and limits. Do I carry every policy listed, at every limit, including aggregate basis and employer’s liability?
2. Endorsements. Who must be an additional insured, for ongoing or completed work, and is primary and noncontributory or a waiver required?
3. Time. How long must completed operations or claims-made coverage last after the job?
4. Insurer standards. Is there a minimum rating or a deductible disclosure?
5. Proof and flow-down. What certificates and endorsements are due when, and must my subs match?
6. Indemnity. What does the hold harmless clause make me responsible for? See hold harmless and indemnification clauses.

Change the policy or change the contract?

When the checklist turns up a gap, you have two options, and the choice is usually easier than it looks.

Change your insurance when the requirement is standard for your trade and you’ll see it again, like a higher limit, a blanket additional insured endorsement or a waiver on workers’ comp. Paying once to meet a common requirement beats renegotiating it with every client, but only if you’ll really see it again. With Corgi, you can get a quote online in about five minutes, questions are answered by underwriters, not a broker, and your certificate is available the day you buy, ready to send to the client from your account.

Change the contract when the requirement doesn’t fit the work, so you aren’t bending your policy around a one-off. Fair requests include removing additional insured status from professional liability, dropping lines the job doesn’t need, letting you promise notice of cancellation in place of your insurer, and lowering a limit that’s out of all proportion to a small engagement. Ask early and say why, because a short, specific reason tied to the work gives the client something to approve, while a general complaint about the exhibit gives them nothing.

What doesn’t work, however, is asking your agent to make the certificate say you comply. ACORD’s FAQ is plain that referring to a contract on a certificate doesn’t provide coverage, and New York’s Department of Financial Services says state law bars anyone from willfully requiring a certificate to contain terms the policy lacks.