While software contracting comes with a great deal of perks, it also comes with some exhaustively dull tasks. Since our company prefers corp-to-corp contracts, every new contract comes with an arduous task of reviewing the contract specifics. Contracts, authored by lawyers, speaking lawyer-speak can be mentally taxing for anyone and some folks will simply sign whatever is placed in front of them just to avoid reading pages of mumbo-jumbo.
The whole idea of just signing whatever gives me the hives, but I can understand the reluctance of reading these agreements with diligence. Contracts are binding legal documents, they need to be taken seriously, but unfortunately it sometimes requires more offline research than any sane person wants to perform. Lately, there is a trend in agreements that absolutely scared the crap out of me:
YourCompany shall add OurCompany as an additional insured to the Comprehensive General Liability policy. OurCompany’s insurance shall be primary, and any insurance maintained by OurCompany shall be excess to and not contribute to YourCompany's insurance.
Please excuse the phrasing; OurCompany == them, YourCompany == me as typically the agreement is provided from them.
My layman's interpretation of this statement implied that I'd add this new company onto our CGL policy and in the event that they were sued it would be covered by our policy! The whole idea seemed completely absurd! I could only compare it to inviting some stranger off the street, giving them my car and legally signing a document that I was legally responsible for them driving through the Mall of America. They act unprofessionally or careless, we foot the bill. The whole thing seemed ridiculous at its core and the first time I had seen this clause it seemed unique to this one contract that was authored by a massive media company inclined to bully subcontractors into whatever the hell they wanted. Fearing I was over-reacting, I asked for clarification on the statement and their response was "*shrug* it was asked for by our legal department". Unconvinced, I spent the next couple nights researching via Google and it continued to appear that my concern with the clause was justified. In that particular instance, I chose not to sign that contract partly because this clause would not be removed from the agreement. That was 2'ish years ago.
Fast-forward to a couple weeks ago, a new contract, similar clause, and an appearance of it trending in newer contracts. I sought out the wisdom from insurance professionals on Reddit, but was met with crickets. While I probably could have negotiated it's removal, this time I skipped Google and went directly to an authority on the subject, namely our CGL insurance provider. The policy agent didn't shed much light on the topic, but put me in touch with one of their actuaries (Quentin) who provided insight into it's meaning. Here's what I learned.
Quentin stated that I was applying a 'broader definition to it than it means', the clause is limited to the services that you perform for them. The purpose of me holding a CPL is to cover any claims against work that I perform. OurCompany has a similar CPL to cover claims against work that they perform. This clause essentially provides that separation as a provision for the court system. Without the clause, a claim can be brought against any company for any work, this statement essentially says 'if there is a claim against them, you need to file a claim against them', work that they perform is covered by their policy, work that you perform is covered by your policy. Claims are limited to work that you perform for them, not a universal catch-all of coverage which is what my layman's interpretation of the clause was.
The phrasing to this day still gives me the willies, but the clincher that set my mind at ease was when Quentin pointed out that insurance companies by nature are risk-averse, they aren't going to do something that puts a lot of additional liability on them. "This additional insurer, we literally give it out for free any time your client requires it", "if we thought it could generate claims against us, we would charge for it". So, if someone who daily performs statistical analysis of risk isn't concerned by this I guess it shouldn't concern us, it's part of the blanket policy.
Please, perform your own research on the topic, consult your own insurance provider. Given that there is a great deal of confusion on the topic and it caused me a great deal of anxiety and time I thought I'd share it with those that may find it useful.
Cheers.
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