What Insurance Does a Contract Actually Require? Reading the Clause Before You Sign

Most contractors and suppliers deal with insurance requirements the same way: forward the request to the broker, receive a certificate, send it on, start the job. That works right up until the moment it does not — and when it fails, it usually fails because the certificate looked compliant without actually being compliant.

Here is what the common requirements mean and how to check yours.

"Name us as additional insured"

An additional insured is a third party added to your liability policy so that they have protection under it for claims arising out of your work. It is not the same as a certificate holder. A certificate holder simply receives a copy of the certificate; being listed as one gives them no coverage at all.

This is the most common mismatch we see. The contract asks for additional insured status, the certificate lists the party as certificate holder, and nobody notices until there is a claim.

"Waiver of subrogation in our favour"

Subrogation is your insurer's right to recover from whoever caused a loss after they have paid you. A waiver gives up that right against the named party, so that the party you are working for cannot be pursued by your insurer.

The important point: you cannot simply agree to this in a contract and assume it holds. Your policy has to permit the waiver, and it usually has to be arranged before the loss occurs. Signing a contract waiving subrogation without checking the policy can put you in breach of policy conditions.

"Primary and non-contributory"

This says your policy pays first and does not ask the other party's insurer to contribute. Without it, two insurers can spend months arguing about who responds while the claim sits unresolved. Not every policy will grant it, and it is worth knowing before you commit contractually.

"Cross-liability" or "severability of interests"

This treats each insured under the policy as though they had their own separate policy, so one insured can claim against another. On a project with several parties named under one policy, its absence can leave a party with no route to recover.

Limits: read the number and the structure

A contract asking for $5,000,000 may be satisfied by a $5M primary policy, or by a $2M primary with a $3M umbrella above it — but only if the contract does not specify otherwise. Some contracts require the limit on a per-project basis, which is a materially different and more expensive thing than a shared aggregate.

The completed operations trap

Many contracts require additional insured status to extend to completed operations — that is, to continue applying after your work is finished. Claims arising from construction work frequently surface years later. If the endorsement only covers ongoing operations, that later claim falls outside what you promised to provide.

What to do

Send the insurance section of the contract to your broker before you sign it, not after you are asked for the certificate. A ten-minute read at that stage is the difference between a policy that meets the obligation you took on and a contractual breach you will not discover until it matters.

This article is general information and does not interpret any specific contract or policy. Have your own contract and policy reviewed by a licensed broker.