
Contractual Risk Transfer
Contractual risk transfer is the ability to transfer a risk/loss from one party to another party through the language written in a contract. Contractual risk transfer is when the language in a non-insurance agreement excuses one party from financial or legal responsibility associated with specified actions, inactions, injuries or damages. In contractual risk transfer, one party agrees to indemnify and hold another party harmless in a contract. The indemnitor, backed by their own insurance policy, accepts the liability in the indemnitee’s place.
Some techniques used to achieve contractual risk transfer include indemnity and exculpatory agreements, waivers of recovery rights (subrogation) and comprehensive insurance requirements. If risk-related contract stipulations are well-written, they can effectively protect owners from unexpected liability by literally transferring risk to the contractor or vendors.
Alpha Risk will review and update all your contracts.