Risk Transperence

RISK TRANSFERENCE

Contract risk transfer is one of the variety of different tools that YCPARMIA entities use to protect themselves and YCPARMIA from loss exposure. It is expected that your entity will attempt to transfer risk accident and loss through contracts to other parties. The intended transfer for this is achieved by requiring suppliers, contractors, tenants, and users of public facilities (i.e., the other party to most entity contracts) should protect themselves and your entity against claims or judgements arising from their products, activities, or use of entity facilities. Usually the best way to assure that the transfer takes place (i.e., that the loss be paid by someone other than your entity) is to require insurance. The insurance should protect the entity, its officers, officials, employees, and volunteers. Your entity’s standard request for proposal, date specifications, and contracts should contain a description of the required insurance. In addition, they should contain appropriate “hold harmless” and indemnification clauses. Contractual risk transfer is a basic risk management tool that is used to allocate risk between contracting parties. Generally, it would be our goal to accept no more risk than is reasonable, and to transfer as much risk as possible to the other party. Of equal importance is that the risk transfer requirements are not so onerous that contract negotiations slow down or stop the process. The risk in insurance provisions are subject to negotiation. The final agreed provisions are often largely dependant on the relative negotiations provision of the parties and the importance of the deal. If one of the parties has far more clout than the other, it can impose virtually any requirement it wants. In the simplest terms, it is necessary for each agency to decide on a philosophical basis how much protection it wants in its usual contractual business transactions. Toward that end there are four basic issues that need to be decided:...