The Insurance Clause Illusion: Why You’re Not as Covered as You Think

Most business contracts require “insurance.” Landlords demand it. Tenants promise it. Contractors produce a certificate. Everyone assumes the box is checked. But too often, the actual policy doesn’t match the contract—and when something goes wrong, there’s no coverage where you need it most.

The Illusion

Contracts say “maintain adequate insurance” and attach a generic list: general liability, workers’ comp, additional insured, maybe an umbrella. Parties then treat a certificate of insurance as proof everything is in place. It isn’t. Certificates are not the policy; they don’t change endorsements, exclusions, or limits. The only thing that pays claims is the policy language.

A Real Client Story: The Uninsured Injury

My client was a commercial tenant who hired a contractor for a build-out. The contractor “had insurance” and produced a certificate. But the contractor hadn’t paid attention to the actual coverage. There was no bodily injury coverage for the scenario that happened on the job site. Someone was hurt. When the claim hit, the insurer denied coverage. Who ended up paying at the end of the lawsuit? My client.

Where Insurance Clauses Fail in Practice

• Missing Endorsements: No Additional Insured status for landlord/tenant/GC; no Primary & Non-Contributory.
• Exclusions That Matter: Carve-outs for injuries to contractors’ workers or subcontractors; residential exclusions applied to commercial work; “action-over” style exclusions.
• Certificates ≠ Coverage: The ACORD form looks official, but it doesn’t add coverage or override policy language.
• Completed Operations Gaps: Coverage ends when the job ends—precisely when claims often arise.
• Cancellation Notice Issues: No practical notice to the party who depends on the coverage.

Drafting Checklist: Make the Policy Match the Promise

• Be Specific: Require Commercial General Liability with stated per-occurrence and aggregate limits for bodily injury and property damage.
• Additional Insured: Name the landlord/tenant/owner as AI for ongoing and completed operations via ISO-equivalent endorsements.
• Primary & Non-Contributory / Waiver of Subrogation: State them explicitly.
• No “Labor” or “Employee Injury” Exclusion: Bar endorsements that gut coverage for worker injuries.
• Umbrella/Excess Follows Form: Require that the umbrella mirrors the underlying coverage.
• Proof Beyond Certificates: Allow the right to request specimen policies and endorsements, not just certificates.

Lease Tip I Use in Practice

In commercial leases, remedies against a landlord are often limited to the landlord’s “interest in the real property.” I add language to ensure recovery isn’t illusory: “and the rents derived therefrom.” It’s a practical fix that can make the difference between a judgment on paper and a recovery in the real world.

Don’t Assume You’re Covered—Confirm It

At JDE Law Firm, PLLC, we align contract insurance requirements with real policies so coverage exists when you need it. If you’re about to sign—or you’re unsure whether the other side’s policy actually protects you—get it reviewed before the risk becomes yours.

📞 NY: 718-966-0877

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