By Cary Evans, JD, MPP, CCIC, AIDA™, STS®
Too often, contract review is treated as a legal formality rather than a core risk management function. However, from an insurance perspective, contracts can materially alter your exposure profile.
Areas frequently identified as higher risk during review include:
- Unbalanced indemnity obligations
- Broad or undefined liability assumptions
- Missing or insufficient insurance requirements
- Improper use of waivers of subrogation
- Conflicting or ambiguous terms
A systematic contract review process can help identify and correct these issues before they result in claims or uncovered losses.
Effective review strategies:
- Establish standard contract templates with pre-approved risk language
- Create a centralized review process involving risk management, legal, and insurance advisors
- Train business stakeholders to recognize key risk triggers
- Periodically audit executed contracts for compliance with insurance requirements
Organizations that take a proactive approach to contract review often experience fewer disputes, improved insurer relationships, and more predictable outcomes when claims arise.