Insurance requirements in contracts are essential for risk management and financial protection. They ensure all parties are covered in case of accidents, damages, loss or liabilities arising from the activities defined in the contract. Vendor contracts commonly require evidence of general liability, cyber, professional liability errors and omissions, crime and property insurance. For purposes of this article, we’ll be focusing specifically on crime insurance.
Crime (also referred to as fidelity) is a standard insurance requirement embedded within most contracts. Crime insurance protects organizations against financial loss caused by employee theft and various types of third-party fraud. The employee theft insuring agreement isn’t limited to stealing property of the insured organization’s but can also encompass theft of your client’s property and/or theft of property that you own, hold or for which you’re legally liable.
The crime limit required in contracts is typically a function of what premises, property, systems or information the vendor has access to. The limit required should be commensurate with the level of exposure. Examples of contracts that warrant a higher crime limit include, but aren’t limited to the following:
In addition to the due diligence performed during vendor procurement, we recommend your vendor maintain a robust control framework which meets your standards. To the extent your vendors receive and process payment transactions, it’s important they carry social engineering fraud coverage under their crime policy.
Requesting that you be added as a joint loss payee is another consideration when negotiating contract language. As a third party with an interest in a covered loss, you’d be listed jointly on the settlement check with the first name insured. As a loss payee, you aren’t an insured under your vendor’s policy.
As your insurance broker, we’re happy to assist in reviewing and making recommendations around what insurance requirements would best serve you.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
