Insurance

Table of Contents:

• Coverage and Limits

• Reasonable and Customary Limits

• Waiver of Right of Subrogation

• Additional Insured and Loss Payees

• Remedies for Breach

Insurance

Contracts involving the provision of professional services commonly include terms that require the service provider to carry liability insurance coverage to protect against losses that may be incurred by the client company in connection with the contractor’s services.

Coverage and Limits:

The following exemplars provide a checklist of typical liability coverages and coverage limits:

Exemplar C41-1

Service Provider shall carry, at a minimum, insurance in the following coverages and amounts: (a) Occurrence-based General Liability coverage and Prods/Com Ops coverage in amounts no less than $1,000,000 each occurrence and $2,000,000 aggregate; (b) Technology & Information Professional Liability coverage in an amount no less than $2,000,000; (c) Workers’ Compensation/Employer’s Liability coverage as required by the applicable state law; $1,000,000 per employee, accident, and disease; and (d) Auto Liability Insurance coverage for any hired and non- owned autos in an amount no less than $1,000,000, with a combined single limit each accident for bodily injury and property damage.

Exemplar C41-2

During the Term of this Agreement, Contractor agrees to have in full force and effect, in the following types of insurance:

i. Statutory Workers' Compensation Insurance covering all persons employed by Supplier engaged in furnishing Services under this Agreement, including liability coverage, with minimum limits of at least five hundred thousand dollars ($500,000) per accident and five hundred thousand dollars ($500,000) per disease or whatever limit is required by law, whichever is higher.

ii. Comprehensive Automobile Insurance for hired and non-owned motor vehicles in an amount not less than $1,000,000 each occurrence combined single limit bodily injury and property damage.

iii. Commercial General Liability Insurance policies with a minimum limit of $1,000,000 per occurrence and $2,000,000 general aggregate. Client shall be named as an "additional insured" to Contractor’s Commercial General Liability policies. Such policies shall be endorsed to provide a waiver of subrogation in favor of the “Additional Insureds”.

iv. Commercial Crime coverage of $5 million per occurrence only if Contractor receives Client’s funds in order to pay their carriers.  The coverage will include third party layered coverage totaling up to twenty million dollars ($20,000,000) and Client shall be named an additional "Loss Payee" to Contractor’s Commercial Crime Insurance.

v. Professional Liability/Errors & Omissions/Professional Services/Technology Errors & Omissions (if applicable) with limits of $1,000,000 per incident/claim with an aggregate limit of $2,000,000 – claims made policy.

vi. Cyber Risk, Network Security and Privacy Liability (if applicable) with limits of $2,000,000 policy limit – claims made policy.

vii. Upon request Contractor shall provide to Client a certificate of insurance for all insurance required in this Section.

viii. All policies listed in subsections (a) through (b) above are required to be an occurrence policy limit made with an insurer with an A.M. Best rating of at least A-/X or better.

ix. Any policy deductibles or retentions, whether self-insured or self-funded, shall be the obligation of Contractor and shall not apply to Client. All policies shall be endorsed to provide that in the event of cancellation, non-renewal or material modification, Client shall receive at least thirty (30) days written notice thereof

x. In the event Contractor fails to procure said insurance and/or shall fail to maintain the same in full force and effect continuously during the Term of the Agreement, Client shall be entitled, but shall not be obligated; to procure the same and Contractor shall immediately reimburse Client for such premium expense.

xi. Contractor will cooperate with Client in connection with the processing of claims and the collection of any insurance proceeds that may be payable in the event of loss or claim under any of the policies of insurance included in this section and execute and deliver to the insurers such proofs of loss and other documents as may be required for the recovery of the proceeds of any such insurance.

Exemplar C41-3

Vendor shall, prior to commencement of this agreement, obtain, at its sole cost and expense, and at all times during the term of this agreement and for 5 years thereafter maintain the following types of insurance with limits of coverage not less than those set forth below.

1. Workers’ Compensation Insurance in compliance with statutory laws.

2. Employers’ Liability Insurance with minimum limits of: (a) $1,000,000 Each Accident, (b) $1,000,000 Disease - Each Employee, and (c) $1,000,000 Disease - Policy Limit

3. An Insurance Services Office occurrence based Commercial General Liability Insurance Policy, including but not limited to contractual liability, personal injury liability, advertising injury liability and products/completed operations liability coverage with minimum limits of: (a) $1,000,000 Per Occurrence, (b) $2,000,000 General Aggregate, and (c) $2,000,000 Products/Completed Operations Aggregate

4. Automobile Liability Insurance, covering owned, non-owned, leased or hired autos, with a minimum combined single limit of $1,000,000 Each Accident.

5. Umbrella Liability Insurance, in excess of 2 & 3 above, with minimum limits of $5,000,000 Per Occurrence and $5,000,000 General Aggregate

6. Professional Liability/Errors & Omissions/Professional Services/Technology Errors & Omissions (if applicable) with limits of $1,000,000 per incident/claim with an aggregate limit of $3,000,000 – claims made policy.

7. Cyber Risk, Network Security and Privacy Liability (if applicable) with limits of $3,000,000 policy limit – claims made policy.

In the following exemplar, the parties agree that CGL insurance shall include property damage and contractual liability coverage:

Exemplar C41-4

CONTRACTOR, at its sole cost and expense, shall procure and maintain during the term of this Agreement commercial general liability insurance covering property damage liability, including broad form property damage liability and contractual liability coverage (either a blanket policy or a policy applying specifically to this Agreement), with limits of not less than $1 million combined single limit per occurrence of loss or damage. Such insurance policy shall name COMPANY as an additional insured and provide COMPANY with certificates of insurance that require either the insurance CONTRACTOR or the insurance agent or broker to notify COMPANY in writing of any lapse in coverage. CONTRACTOR’s insurance coverage shall be considered primary as to any insurance coverage provided by COMPANY. All insurance policies must be issued by an admitted insurance carrier with an A.M. Best rating of A-8 or better.

In the following exemplar, the contractor can satisfy the coverage limits for CGL liability coverage by leveraging umbrella or excess liability coverage limits:

Exemplar C41-5

Supplier will maintain at its expense (and provide certificates of insurance at IBM's request) i) all statutory mandated insurance such as workers’ compensation and employer’s liability, ii) commercial general liability insurance including products liability and completed operations with a minimum per occurrence limit of 5,000,000 USD (or local currency equivalent), and iii) automobile liability insurance (if a vehicle is to be used in performance of this Agreement) of at least 5,000,000 USD (or local currency equivalent). Commercial general liability insurance and automobile insurance policy limits may be met through a combination of primary and umbrella/excess liability insurance and must name Company as an additional insured. Insurance required under a SOW, WA or Attachment must be purchased either from insurers with an AM Best Rating of A- or better, or with a Standard & Poor’s rating of BBB and $50M in policy holder’s surplus or greater.

Reasonable and Customary Limits

Where the parties cannot agree to specific coverage limits, they may be able to agree to maintain amounts that are reasonable and/or customary in the industry:

Exemplar C41-6

Contractor shall maintain adequate insurance from reputable insurance companies sufficient to cover its risks and liabilities of such types and in such amounts as are customary for entities engaged in providing services similar to the Services to be provided by Contractor under this Agreement. The policies providing such insurance will name Client as an additional insured and contain a loss payee endorsement in favor of Client.

Exemplar C41-7

If reasonably available in such jurisdiction, Employer’s Liability insurance shall be maintained in reasonable and customary amounts for companies of like operations and like size. For US operations, such amounts shall be not less than $1,000,000.

Exemplar C41-8

Contractor agrees to maintain in full force and effect adequate insurance coverage (including at least general liability, worker’s compensation and auto liability) with limits that are reasonable and customary for its business, to cover liabilities and claims that may arise in relation to or in connection with providing the Services under this Agreement. Contractor shall name Partner and its affiliates, directors, employees and franchisees as additional insureds to its general liability and auto liability policies. Upon request, Contractor will furnish Partner with a certificate of insurance evidencing these coverages. With respect to the aforementioned policies and where permitted by law, Contractor hereby waives, on behalf of itself and its insurance carriers, any and all claims and rights of recovery against Partner or its affiliates, including without limitation, any rights of subrogation, with respect to any party’s performance under this Agreement or for any loss or damage to Partner or its affiliates, including without limitations personal injury, death or damage to its property or properties of others.

Where worker’s compensation insurance is not mandatory to cover job-related employee injuries (e.g., where statutory exemptions for small employers apply), the following exemplar assigns the liability for such injuries to the contractor:

Exemplar C41-9

Contractor shall maintain in force at all times during the term of this Agreement the following insurance including any special terms indicated and shall, upon written request of Client, provide certificates of insurance for each type of insurance specified below.

a. Commercial General Liability Insurance in respect of Contractor 's liability for loss of or damage to property, including property of Client, and against liability in respect of injury, including death, resulting therefrom, for the sum of not less than $5,000,000 for any one occurrence and in the annual aggregate. Contractor will notify Client as soon as possible but no later than thirty (30) calendar days in the event of cancellation or termination of such insurance if coverage is not immediately replaced.

b. Statutory Worker's Compensation and Client’s Liability Insurance with a limit of not less than $1,000,000 each accident or disease. If Contractor is not required by law to carry such coverage, Client shall not be responsible for any injury and disease sustained by Contractor or its employees, agents or representatives while in the performance of this Agreement.

c. If applicable, Professional Liability or Errors and Omissions Insurance covering any error or omission in the performance of Services hereunder for the sum of not less than $1,000,000 for any one claim and $3,000,000 in the annual aggregate.

Waiver of Right of Subrogation

A contract term that requires an insured party to have its insurance carrier waive its right of subrogation can be problematic, since it ostensibly requires the carrier to agree to such a waiver via a special endorsement—which is not something that the carrier is apt to do, even with additional compensation through fees or increased premiums. The following exemplar makes such a waiver requirement more palatable by making it inapplicable if the party benefiting from the waiver is at fault for the insured loss:

Exemplar C41-10

Contractor agrees that Contractor, Contractor’s insurer(s), and anyone claiming by, through or under Contractor shall have no claim, right of action, or right of subrogation against Company based on any loss or liability insured under the forgoing insurance, however no waiver of subrogation shall apply to the extent the claim is caused by the party to whom the waiver is granted.

Alternatively, the following exemplar provides added insurance (no pun intended) that the insured party suffering an insurable loss will not seek to claim recompense from the other party:

Exemplar C41-11

Contractor does hereby remise, release and discharge Company and any officer, agent, employee or representative of Company, of and from any liability whatsoever hereafter arising from loss, damage or injury for which insurance (permitting waiver of liability and containing a waiver of subrogation) is carried by the Contractor at the time of such loss, damage or injury to the extent of any recovery by Contractor under such insurance.

Additional Insured and Loss Payees

In addition to having an obligation to hold adequate insurance coverage, an insured party may be required to permit the other party to receive insurance benefits from the insured party’s policies as a loss payee (for property damage claims) and/or as an “additional insured” (for commercial general liability claims):

Exemplar C41-12

All such insurance policies shall name Lessor and any assignee of Lessor as additional insureds and all casualty insurance policies shall name Lessor and any assignee of Lessor as loss payees.

Exemplar C41-13

Company and its subsidiaries or affiliated and related entities and their directors, officers and employees (“Additional Insureds”) must be named as Additional Insureds under the Commercial General Liability and Umbrella Liability Policies. General Liability and Umbrella insurance policies must contain Cross Liability Endorsements, or their equivalents. Further, coverage for the Additional Insureds shall apply on a primary basis irrespective of any other insurance, whether collectible or not. Any policy deductibles or retentions, whether self-insured or self-funded, shall be the obligation of Vendor and shall not apply Company. General Liability and Umbrella policies shall be endorsed to provide a waiver of subrogation in favor of the “Additional Insureds”. All policies shall be endorsed to provide that in the event of cancellation, non-renewal or material modification, Company shall receive at least thirty (30) days written notice thereof. Vendor shall furnish, with certificates of insurance evidencing compliance with all insurance provisions noted above prior to the effective date of the agreement and annually at least ten (10) days prior to the expiration of each required insurance policy.

Exemplar C41-14

Customer shall be named as an "additional insured" to Customer’s commercial general liability policies. Any insurance coverage (additional insured or otherwise) that Company provides for Customer will only cover liability assumed by Company in this Agreement; its insurance coverage will not cover liability in connection with or arising out of the wrongful or negligent acts or omissions of Customer. Company will furnish to Customer, upon request, a certificate of insurance via email indicating that its coverage is in effect. Customer and Company waive any right of recovery from each other for property damage or loss of property use, however occurring. This waiver includes losses covered by policies of fire, extended coverage, boiler explosion, and sprinkler leakage. This waiver will not apply to claims for personal injury or death.

In any event, the parties in the following exemplar clarify that one party being named as a loss payee or an additional insured under the other party’s insurance policies does not expose the insured party to liability beyond agreed-to limitations:

Exemplar C41-15

Seller's obligations to Buyer, as an additional insured, are limited to the indemnity obligations, and liability limitations in this Agreement and only to the limits stated in the Agreement.

Remedies for Breach

Where a party breaches its contractual obligation to procure and maintain insurance, several remedies may be made available to the non-breaching party, including the right of the non-breaching party to obtain such coverage at the breaching party’s expense or the right to terminate the contract:

Exemplar C41-16

In the event Vendor shall fail to procure said insurance and/or shall fail to maintain the same in full force and effect continuously during the Term of the agreement, Company shall be entitled, but shall not be obligated; to procure the same and Vendor shall immediately reimburse Company for such premium expense. Vendor will cooperate with Company in connection with the processing of claims and the collection of any insurance proceeds that may be payable in the event of loss or claim under any of the policies of insurance included in the Section and execute and deliver to the insurers such proofs of loss and other documents as may be required for the recovery of the proceeds of any such insurance.

Exemplar C41-17

CONTRACTOR is considered to be in immediate breach of this Agreement if there is a lapse in any coverage. A lapse in coverage by CONTRACTOR shall act as a basis by which COMPANY can immediately terminate this Agreement without any formal written notice. At or before delivery of the Equipment to CONTRACTOR, CONTRACTOR shall provide COMPANY with acceptable evidence of insurance coverage in accordance with this Agreement by delivering certified copies of insurance policies that provide the required coverage, or certified copies of existing insurance policies that have been endorsed to provide the required coverages, or certificates of insurance executed by the insurer or its authorized representative that certify the required coverages. The furnishing of such insurance shall not relieve CONTRACTOR from any liability or obligation for which it is otherwise responsible to COMPANY. COMPANY shall be under no duty to examine any certificate provided by CONTRACTOR or to advise CONTRACTOR that its insurance coverage does not comply with the requirements set forth herein.