Facility Use Agreements
In the current climate, many events are being postponed or cancelled, but these measures will not be necessary forever. When event and meeting restrictions are lifted, it will be important to consider how renting or leasing your facilities, or renting or leasing the facilities of others, may create potential liability for your organization. Requiring appropriate agreements and insurance requirements beforehand is a crucial, and often neglected, best practice.
A Facility Use Agreement defines exactly what is expected of both parties in a rental or leasing scenario, and is an important step in protecting your entity. We strongly recommend that agreements include all of the following elements:
- Hold Harmless Agreements
- Indemnification Agreements
- Certificates of Insurance naming your entity as an Additional Insured on the renter/lessee’s or tenant’s policy
When you lease your premises to a group or organization, require them to provide property and liability insurance for the building by contract. We do not recommend volunteering to sponsor or operate the special events of others, as it would lend your organization’s liability coverage to outside parties. This can result in serious losses to your entity if injuries or damages occur, regardless of who is at fault.
Clear Risk Solutions can assist by providing sample agreements, guidance on when contracts should be entered into, and what limits to require.
If you need assistance navigating use of your facilities by others, or your use of another facility, please contact your broker or risk manager to help determine what protections you need.
Contract Liability
Warm weather and sunny skies are optimal conditions for completing any contract work on your organization’s maintenance list. It’s important to consider both the risks and rewards of using contractors, however. The majority of contract liability can be avoided by requiring indemnification agreements and adequate insurance coverage from contractors. An indemnity agreement places responsibility for safe practices and consequences for damages on the contractor. Requiring proof of insurance from the contractor ensures a source of payment other than your organization’s resources for any losses the contractor incurs. When entering into contracts, keep the following steps in mind.
Review the Risks and Relationships
Analyze the scope of work involved in the agreement, the reputation of the contractor, and the relationship facility use and contracts that they will have with your organization. Clearly defining and adequately describing these items is crucial, especially if there are later disputes over who exactly was responsible for what.
Hold Harmless / Indemnification Language
All of your contracts should include language that obligates the contractor to defend your organization in the event of a loss. It is best to use your own contract form with language that has been drafted by your attorney, but if you must accept another form or negotiate terms always have your attorney or legal counsel review and approve any language before executing the agreement.
Require Adequate Insurance Conditions
Include any insurance requirements in your initial bid or contract negotiation so contractors are prepared in advance. Your entity should also request the following protections be included in the contractor’s policy:
- Your organization named as Additional Insured on the contractor’s policy.
- States that it will be primary for any claim (with your coverage applicable only after their limits are paid out).
- Includes a waiver of subrogation from the contractor’s insurer in your favor.
- Provided from an A-rated carrier or otherwise appropriate depending upon the size of the project or the type of risk. If you are unsure, or the insurer is not rated, check with your broker. A.M. Best and Standard & Poor’s are common standards for insurer financial stability.
In addition, you should ensure:
- The contractor is capable of paying the deductible.
- Require immediate notification if the contractor’s coverage is cancelled.
- Obtain proof of insurance, usually a Certificate of Insurance, naming your organization as the Certificate Holder.
Adjust the Requirements to the Risk
Always obtain adequate protection for your organization. Your broker can advise you based on their experience and industry trends. Consider long-term effects of potential incidents that may occur from your project, such as reputational damage and future loss of revenue, when setting your required limits. If you have questions regarding minimum required limits, contact your broker or risk manager.
Never enter into a contractual agreement blind to the potential risks – keep your organization’s assets safe by always implementing the aforementioned safeguards.