This clause requires one or both parties to obtain and maintain insurance coverage that protects against losses or liabilities arising from community benefit obligations—typically commitments to provide local hiring, job training, affordable housing, community services, or other social benefits as part of a development or service contract. The clause specifies what types of insurance are required (general liability, errors and omissions, employment practices liability, etc.), minimum coverage amounts, and which party bears the insurance cost. This matters because community benefit agreements often involve ongoing obligations to third parties (community members, local workers, residents) who aren't signatories to the contract, creating potential liability exposure if those benefits aren't delivered as promised or if someone is harmed during benefit-related activities.
Insurance requirements in this context protect both the performing party (by covering claims from community members) and the beneficiary/municipality (by ensuring a funded source for claims). However, the clause can create significant cost burdens and coverage gaps if not carefully drafted. For example, standard commercial insurance policies may not cover "failure to provide promised community benefits," and parties may struggle to find insurers willing to cover reputational harm or breach of community commitments. The clause also raises questions about who controls the insurance claim process and whether insurance proceeds are the exclusive remedy for benefit-related disputes.
Before agreeing to insurance requirements, obtain quotes from your insurance broker to confirm that the required coverage types and amounts are actually available and reasonably priced in the market. Negotiate a "best efforts" standard rather than absolute obligation—for example, "Contractor shall obtain and maintain insurance as required by this clause, provided such insurance is available at commercially reasonable rates." Clarify that insurance is not the exclusive remedy for community benefit disputes; preserve the right to dispute whether benefits were actually owed or whether claimed losses are covered. Request that the other party be named as an additional insured only for claims arising from your negligence, not for claims arising from your good-faith disagreement about benefit obligations. Consider proposing a community benefit escrow or performance bond as an alternative to ongoing insurance, which may be more cost-effective and easier to administer.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires one or both parties to obtain and maintain insurance coverage that protects against losses or liabilities arising from community benefit obligations—typically commitments to provide local hiring, job training, affordable housing, community services, or other social benefits as part of a development or service contract.
Why should I care about this clause?
The clause specifies what types of insurance are required (general liability, errors and omissions, employment practices liability, etc.), minimum coverage amounts, and which party bears the insurance cost.
What are my options?
This matters because community benefit agreements often involve ongoing obligations to third parties (community members, local workers, residents) who aren't signatories to the contract, creating potential liability exposure if those benefits aren't delivered as promised or if someone is harmed during benefit-related activities.
How does this affect small businesses?
Insurance requirements in this context protect both the performing party (by covering claims from community members) and the beneficiary/municipality (by ensuring a funded source for claims).