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Professional Liability and Fidelity Bond Coverage

By Consultant DaveA ·

I am an independent, incorporated consultant providing messaging software development services for major corporations. I've switched divisions at my current client, and because it is a new contract, the assignment was processed by HR. It appears they now have all kinds of new requirements for Liability Insurance, etc. that did not exist before. I am being asked to provide Proof of Insurance for $5M E&O, $5M Fidelity Bond, etc.

The client company has allowed me, in lieu of signing policies myself - which can be expensive - to bill through a third party. This third party will deduct a portion of the billings, and include me under its policies. This is a fair arrangement, as the percentage is about 50% of the premiums I would have to pay, and I would not need to maintain the lofty $5M overage for an extended period after the contract is completed.

Here is the catch: the third party (XYZ) sent me their standard contract, which assumes I am a W-2 or 1099 individual, not a corporation. Furthermore, the primary reason I am being asked to execute an agreement with XYZ is not covered by the contract they provided me with; that is, Professional Liability (Errors & Omissions), General and Excess Liability insurance, and Crime - Fidelity Bond coverage meeting the client's requirements of insurance.

In fact, just the opposite appears to be written into the contract; the sections entitled "Indemnity" and "Liability" each individually place all responsibilities upon the Contractor - that's me - and completely indemnify XYZ from any liability or culpability from any event expected to be covered by the previously mentioned Requirements of Insurance.

There is nothing written into the contract to indicate:
- XYZ is meeting the Requirements of Insurance for the Client;
- XYZ is including the Contractor under its coverage;
- XYZ is protecting and indemnifying the Contractor by way of such coverage;
- XYZ is specifically obviating the need for the Contractor to obtain, carry, and maintain extended coverage on its own to meet the requirements of the Client.

After reviewing these concerns with XYZ?s President, I was invited to submit a modified contract that would address my concerns. That was 4 weeks ago, and I have not yet received a response from XYZ regarding this. Today, I received an email from the HR rep asking why I haven't gotten back to XYZ with a signed contract, or submitted some other proof of insurance. It turns out that XYZ told HR that they rejected my contract modifications, and have not heard from me since. They did not indicate or profess any attempt to further negotiate these modifications, or what their counter proposals were, only that my changes are unacceptable, and they haven't heard from me.

This impasse is not currently preventing me from working at the client location, nor is it preventing me from billing the client manager and receiving payment, but I would like to clear the air and comply with the client's requirements as quickly and affordably as possible. My concern, of course, is that HR may suddenly suspend my access to the facilities ? and billable income - until this matter is resolved to their satisfaction.

While I don?t have a specific question, I would appreciate any advise or insight as to how to proceed further with this matter, as well as allow others to share their experiences with clients in this regard.

Dave A.

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