The purpose of this paper is to discuss the contractual liability issues which face the University of Wisconsin and how these issues may best be controlled by the campus risk manager.
Contractual liability is any liability or responsibility for loss which is assumed by the University under a contract which would normally not be the responsibility of the University had the contract not existed. For example, when the University leases property from another party, it assumes responsibility for injuries arising out of the property which would normally be the responsibility of the property owner. Such transfers of liability most often come in the form of hold harmless and indemnity agreements. (These agreements are discussed in detail in Section 4, A of this manual.)
State Statutes prohibit the University from signing any contracts which contain promises of indemnification for losses that the University is not responsible for. This posture is necessary because the State, as a representative body of its tax-paying public, cannot make promises against, or be held responsible for, future unknown debts. Any time a contract is used which contains contractual language that is not within the scope of State Statutes, contractual liability insurance must be purchased to cover the exposure. System Risk Management administers this coverage as outlined below.
III. Policy Details
Carrier: Burlington Insurance Company
Policy Number: HGL0022266
Policy Date: Annually-September 1
Limits: $1M unless otherwise negotiated
Deductible: $5000 per claim
Coverage: This policy covers bodily injury and property damage liability which the University has assumed through contractual agreements specifically designated in the policy. This coverage is specifically purchased for those contracts which impose liability that cannot be covered by the State Liability Program due to statutory limitations. Coverage may only be secured after a specific agreement has been reached between the parties regarding the limits of liability.
Exclusions: Some exclusions include professional liability, war, workers’ compensation issues, public authority, liquor liability, damage to property of the insured, pollution liability, etc.
IV. Procedures-Contract Review
When a school, college, department, etc., is presented with a contract from an outside party, whether it be for the use of facilities or equipment, for participation in an event, or for any other purpose, the contract should be sent to the campus risk management office for evaluation.
The risk manager should:
- Read through the contract to determine if contractual transfers exist in any form.
- Evaluate the contractual transfer agreements to determine if the intent of the clause conforms to the acceptable language of the State. Make reference to section 4, A IV for examples of acceptable language. If the contract does not meet the requirements of the University System, then negotiation for inclusion of our standard language should ensue.
- If difficulties persist in developing acceptable language, UWSRM should be consulted for suggestions or alternatives.
- If the contract must be accepted by the campus with wording that is incompatible with the statutory requirements, then the contract will have to be insured under the System contractual liability policy. This can only be done when a limit of liability (preferably $1,000,000) has been negotiated and stated in the contract.
- The campus risk manager should maintain a file of all contractual agreements for a period of ten years to ensure that control of the contractual exposure is met.
- Although it is impractical to expect the risk manager review all contracts on campus, a good flow of communication between departments will result in increased awareness by the risk manager and department heads. It is the goal of System Risk Management that contractual review be addressed as an ongoing risk management function in the course of daily interactions and at the annual risk management conferences.
V. Procedures-Coverage and Claims
- To obtain insurance protection for those contracts which are incompatible with statutory requirements, UWSRM should be contacted to discuss the situation. Send a copy of the complete contract along with a request for coverage. This should include dates of coverage, limits of liability, contact person on campus, and a description of the circumstances surrounding the contract.
- With adequate information a quote for the insurance coverage can be obtained from the insurer in 1-2 weeks. The cost to insure each contract varies depending on the limits of insurance required and the risk involved. Feasibility of insurance will have to be determined by the campus.
- Coverage will be bound upon approval of the quote from the campus. A certificate of insurance will be issued along with the billing from our broker.
- Any claims against the University which arise out of the contractual agreement should be submitted directly to System Risk Management for processing.
VI. Authorization to Sign Documents – Regent Resolution #2791
That Regent Resolution #965 approved by the board on March 7, 1975, be rescinded; and that the following revised resolution be approved effective immediately:
That any of the following corporate or administrative officers of the University of Wisconsin System–Secretary, Associate Secretary, Assistant Secretary of the Board, the President, any Vice President, and any administrative officer or administrative assistant designated by the President of the University of Wisconsin System–is authorized to sign:
- Proposals, agreements, contracts and contract supplements with the United States Government, any of its agencies or departments, any State or municipality or any agency or department thereof or any non-profit organization for research work or any other purposes upon approval of the project by the President or any Vice President of the University of Wisconsin System or the appropriate chancellor or his designee; and
- Certifications, releases, inventory reports, and other documents as required by the government in connection with the termination of the contracts with the Federal government for research and educational services furnished by the University of Wisconsin; and
- Applications, notices, bonds, and other instruments required by the Federal government in connection with matters relating to Federal laws and regulations for the purchase and use of tax-free alcohol in the laboratories of the University of Wisconsin System; and
- Purchase orders and other instruments required by the Federal government for the procurement of narcotics for use in the laboratories of the University of Wisconsin System and in University Hospitals; and
- Contracts, leases, and agreements when the consideration is not in excess of $100,000 and is within the budget, and royalty agreements with the University of Wisconsin Press, subject to the understanding that such actions will be reported to the Regents at each subsequent meeting; and
- Transactions of the University of Wisconsin System’s employee savings bonds accounts.
This insurance document is furnished to you as a matter of information for your convenience. It only summarizes the listed policy(ies) and is not intended to reflect all the terms and conditions or exclusions of such policy(ies). Moreover, the information contained in this document reflects coverage as of the effective date(s) of the policy(ies) and does not include subsequent changes. This document is not an insurance policy and does not amend, alter or extend the coverage afforded by the listed policy(ies). The insurance afforded by the listed policy(ies) is subject to all the terms, exclusions and conditions of such policy(ies).