Risk Transfer Contracts

Why Execute a Contract? –Gives more “ownership” to entity performing the service –Sets the terms and conditions of collaboration –Protect Cornell assets –Allows you to transfer the risk to the party responsible for exposure.

Contract Risk Review Identification of the risk that the contractor is assuming in the contract. Identification of the risks that Cornell is assuming in the contract. Evaluation of the appropriateness of the risk assumptions.

Contract Risk Review Evaluation of Cornell’s risk management techniques for those risks that we are assuming. Evaluation of the contractor risk management techniques for those risks that the they are assuming. Evaluation of the insurance and indemnification sections of the contract.

Contract Risk review Review of your contractor's insurance coverage and collection of certificates of insurance. Quantification of the risk to each organization. Communication of the outcome.

Guidelines for Contracts No Contract-No work. Know the terms and conditions of the contract and follow them. The "liability and risk" should follow "the responsibility" and "the activity" being performed.

Guidelines Continued Always conduct a pre-contract review, pre-screening of contractors, and a contract risk review. Never execute an agreement unless you have the transaction authority to do so. When choosing a contractor, make sure you evaluate all contractors using the same criteria.

Low Risk High Risk Transaction High Risk Activity Contractor has Ins. Cornell gets additional named insured status Full indemnification by contractor with resources to pay claim Full indemnification by contractor with questionable ability to pay claim No insurance, no transfer of risk Organization assumes the risk of contractor Preferred Transactions Unacceptable Transactions Cornell's Risk, Cornell has Ins. Gray area CONTROLRISKCONTROLRISK CONTROLRISKCONTROLRISK AVOIDRISKAVOIDRISK AVOIDRISKAVOIDRISK

Cautions Uneven bargaining power. Faulty risk review or no risk review done. Lack of organizational teamwork.

What’s in a Name? Indemnification Hold Harmless Release

Good, Better, Best, Great Job! Sole Negligence Negligence Acts, errors or omissions Arising out of or in any way related to

So You Want Insurance What types of insurance should I ask for? What limits should be required? What proof of coverage do I need? What this I hear about status? What should I do about their property? What about my property?

Liability Coverage FY Coverage: St. Paul Coverage: Federal Insurance Co.. Coverage: National Surety Coverage: United Educators Coverage: $500,000 Self Insured Retention

Property Coverage Coverage: $2.6 Billion FM Global Insurance Company Coverage: $500,000 Maximum Self Retention FY

Liability Basics Occurrence vs. Claim’s Made Aggregate limits Additional insured, additional named insured, or certificate holder

Contractor Insurance Requirements General Liability- $1,000,000 Auto- $1,000,000 Workers Compensation- Statutory Limits

High risk activities Comprehensive General Liability- $5,000,000. Bus travel- $5,000,000 Use of Aircraft- $5,000,000 minimum

Problems Certificate of Insurance Copy of Policy Special Exposures Requirement to insure risks not covered. Self Insurance Waiver of subrogation

Problems Separate limits Primary Insurance requirement Deductible provisions Special, incidental or consequential damages Patent issues Cross liability

Problems Insurance company size Insurance company quality Licensed to do business Professional liability requirements Faulty risk transfer- Government partners

Contractor Examples HGH lawsuits The disappearance Springtime temperatures of 300 below zero

Questions and Answers