Risk Management Contract Basics Beth Carmichael Risk Manager, Five Colleges Inc Wednesday, June 14, Connecticut Conference of Independent Colleges

2 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

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

4 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 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 Freight Charges Indemnity Inspection Insurance Invoices and Payments Government Contracts Labor Disputes Limitation of Liability Packing Proprietary Rights / Ownership MSDS

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

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

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

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

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

10 Insurance Minimum limits $1,000,000 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. Additional Insured status

11 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 landlord’s insurance.  Waivers are mutual for both parties.

12 Named Insured Refers to the person, corporation, partnership, or other party or parties named in the declarations page of the policy. 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

13 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. the courts could rule that the policy limitations do not apply to the coverage provided an additional insured.

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

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

16 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. Retain records at least seven years or longer Use your colleagues as resources.

17 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.

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