This clause requires one party (usually the service provider, contractor, or shipper) to furnish proof of insurance—typically in the form of a certificate of insurance—before commencing work or performance under the contract. The clause specifies what types of coverage must be maintained (general liability, workers' compensation, professional liability, etc.), minimum coverage limits, and the required timing for providing proof. It may also require that the certificate name the other party as an "additional insured," meaning that party is protected under the policy if they are sued for the contractor's negligence.
This is a straightforward but critical protective mechanism. By requiring proof upfront, the party requesting it (usually the buyer or principal) confirms that the performing party has insurance before relying on them. This prevents situations where a contractor causes injury or property damage and turns out to be uninsured, leaving the principal liable or uncompensated. The clause is especially important in construction, transportation, and professional services where third-party injury or property damage is a realistic risk.
Specify exactly what proof is acceptable (original certificate of insurance on the insurer's letterhead, not a copy or email), who must provide it (the contractor, not the contractor's insurer), and when it must be provided (before any work begins, not after). Name specific coverage types and minimum limits (e.g., "$1 million general liability, $500,000 property damage"). Require that the certificate name your organization as "additional insured" and include a waiver of subrogation (preventing the insurer from suing you). Include a requirement that the contractor notify you within 10 days of any cancellation or material change to the policy. Do not accept verbal assurances; always obtain written proof. Consider requiring annual renewal of certificates for long-term contracts.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires one party (usually the service provider, contractor, or shipper) to furnish proof of insurance—typically in the form of a certificate of insurance—before commencing work or performance under the contract.
Why should I care about this clause?
The clause specifies what types of coverage must be maintained (general liability, workers' compensation, professional liability, etc.), minimum coverage limits, and the required timing for providing proof.
What are my options?
It may also require that the certificate name the other party as an "additional insured," meaning that party is protected under the policy if they are sued for the contractor's negligence.
How does this affect small businesses?
This is a straightforward but critical protective mechanism.