Insurance requirements in commercial agreements and corresponding additional insured provisions in insurance policies are important tools to manage and transfer risks. However, far too often those efforts are thwarted by inattention and, in some cases, sloppiness. As exemplified by the disastrous outcome for the contracting parties in Cincinnati Insurance Company v. Vita Food Products, Inc., No. 13 C 05181 (E.D. Ill. January 30, 2015), there are many pitfalls to successfully transfer risk and secure additional insured coverage. In Vita Foods, the insurer (Cincinnati) argued that its policy required Vita to have received a certificate of insurance prior to a loss because the contract between the parties (Vita and Painters) was oral. It is unsurprising that parties operating on the basis of an oral agreement failed to satisfy this condition. The court agreed with Cincinnati, finding that the failure to obtain the certificate prior to the loss was fatal to the “additional insured’s” request for coverage. Although this factual scenario is rare, it serves as a harsh example of how parties’ carelessness can defeat their intentions to transfer risk through commercial agreements and insurance policies.
In a recent Client Alert authored by Ann Kramer, Kevin Dreher and Anthony Crawford, the authors, members of Reed Smith’s Global Insurance Recovery Group, discuss how to harmonize risk transfer in commercial agreements and insurance policies.