Last Updated on: April 7, 2025

Mastering Contract Review & Risk Management: A Producer’s Guide to Avoiding Costly Mistakes – A Conversation with Noelle McCall

Insurance producers face increasing challenges in the commercial insurance space, and one of the most overlooked areas is contract review and risk management. Many producers either shy away from reviewing contracts—thinking it falls solely within the domain of attorneys—or they handle it improperly, which can leave their clients vulnerable to uninsured losses, legal disputes, and contract violations.

Contract review is not just a legal formality; it is a critical component of effective risk management and insurance compliance. Producers who understand contractual risk transfer can differentiate themselves in the marketplace, improve client retention, and increase revenue.

This article explores why contract review is essential, the common mistakes producers make, how AI and technology can assist in streamlining the process, and how producers can leverage this knowledge to become trusted advisors rather than just policy salespeople.

Why Contract Review is Essential for Insurance Producers

Too often, insurance producers focus solely on writing policies without considering how their clients’ contracts impact coverage. However, contracts dictate the insurance requirements, liability assumptions, and risk transfer mechanisms that directly affect the insurability of a business.

The Risks of Ignoring Contract Review

Failing to review a client’s contracts can lead to:

Uninsured losses due to contractual requirements exceeding policy limits.
Legal disputes arising from misunderstood indemnity and hold harmless agreements.
Gaps in coverage that leave the client exposed to lawsuits and financial loss.
Certificate of insurance fraud, where subcontractors provide fraudulent or inadequate coverage documentation.

Many producers assume that standard insurance policy language automatically aligns with contractual obligations, but this is rarely the case. If your client unknowingly agrees to higher liability limits or exclusions not covered by their policies, they could be in breach of contract—or worse, financially devastated by an uncovered claim.

Why This is a Competitive Advantage for Producers

Insurance producers who take the time to educate their clients on contract review are more than just policy sellers—they become risk advisors. By ensuring their clients comply with insurance requirements and transfer risk properly, producers help them avoid costly claims, lawsuits, and business disruptions.

With the rise of hard market conditions in commercial insurance, clients are actively seeking advisors who can help them reduce total cost of risk. Understanding contract review is one of the most effective ways to provide that value.

The Most Overlooked Risks in Contract Review

Additional Insured Endorsements: Where Producers Get It Wrong

One of the biggest mistakes in contract review is misunderstanding additional insured endorsements. Many producers assume that blanket additional insured endorsements automatically satisfy contract requirements, but not all endorsements provide equal coverage.

The most commonly required endorsements, CG 2010 (ongoing operations) and CG 2037 (completed operations), require that the named insured be actively performing work for the additional insured at the time of the loss. This can create coverage gaps, leaving the additional insured without protection in cases where the work has been completed.

Better alternatives include the CG 2038 and CG 2040 endorsements, which provide broader coverage without requiring direct work to trigger the additional insured status.

Contractual Liability Clauses: Hidden Dangers

Contracts often include indemnity clauses requiring a party to assume the liability of another. While many standard CGL policies provide contractual liability coverage, certain endorsements may restrict or eliminate this coverage, leaving clients financially responsible for claims they thought were insured.

To avoid this:

Producers should review exclusions for contractual liability in the CGL policy.
Clients should negotiate indemnity clauses that align with their insurance coverage.
Contractual liability waivers should be scrutinized to ensure they do not void coverage.

The Myth of Certificate of Insurance Compliance

Many businesses assume that simply obtaining a certificate of insurance (COI) from a subcontractor or vendor ensures compliance with contract requirements. However, COIs do not guarantee coverage—they are only informational and can be fraudulent or misleading.

To ensure compliance:

Require copies of endorsements, declarations pages, and policy forms for verification.
Use AI-driven compliance platforms to automate certificate tracking and validation.
Educate clients on why certificates alone are insufficient proof of coverage.

Subcontractor Risk & Compliance Challenges

Clients who rely on subcontractors must ensure that their insurance coverage aligns with contractual obligations. Many general liability policies now include subcontractor warranty endorsements, requiring general contractors to verify the insurance status of all subcontractors—or risk losing coverage entirely.

Failure to do so could result in:

No additional insured status for the general contractor.
A denied claim due to subcontractor non-compliance.
Increased out-of-pocket costs for uninsured losses.

How Producers Can Differentiate Themselves with Contract Review

Insurance producers who master contract review can position themselves as trusted risk advisors, rather than commodity brokers. Here’s how:

Move Beyond Just Selling Policies

Clients want advisors who bring value beyond placing coverage. By offering contract review consulting, producers can help clients:

Negotiate better contract terms before signing agreements.
Ensure their policies align with contractual requirements.
Avoid unnecessary liability exposures that could lead to costly claims.

Lower the Client’s Total Cost of Risk

By implementing contractual risk transfer strategies, producers can help clients:

Minimize uninsured liability.
Improve underwriting outcomes for better pricing and coverage terms.
Strengthen risk management practices that reduce claims frequency and severity.

Educate Clients on the True Impact of Contract Terms

Most business owners are unaware of how their contracts affect their insurance. Producers who take the time to educate their clients on indemnification, additional insured status, and compliance requirements will build stronger relationships and win more business.

The Role of AI & Technology in Contract Review

AI-Powered Contract Review & Compliance Tools

Artificial Intelligence (AI) is transforming how producers handle contract compliance. Some of the best AI tools for insurance compliance can:

Scan contracts for insurance requirement mismatches.
Identify missing endorsements that could lead to claim denials.
Automate certificate tracking and validation to prevent fraudulent COIs.

Contract Lifecycle Management (CLM) Software

Many businesses are now adopting contract lifecycle management software to store, negotiate, and track contract compliance. Producers who understand these tools can integrate insurance compliance features into the client’s risk management strategy.

Actionable Strategies for Producers to Improve Contract Review

Step-by-Step Guide for Producers

Request copies of client contracts before placing coverage.
Review the insurance requirements for limits, endorsements, and exclusions.
Compare contract obligations to the client’s policies to identify gaps.
Provide recommendations on coverage changes or policy modifications.
Assist in negotiating contract language to align with available coverage.
Use AI tools to streamline compliance monitoring for renewals.

Conclusion & Next Steps

Insurance producers who embrace contract review and risk management will set themselves apart in the marketplace. The industry is shifting toward consultative selling, where producers who understand risk transfer, compliance, and AI-driven solutions will have a significant competitive advantage.

Next Steps for Producers:

Audit your existing book of business for contract compliance gaps.
Invest in training on contract review & risk transfer strategies.
Leverage AI-powered tools to streamline compliance and policy audits.
Educate clients on contractual risks to improve retention and value.

By mastering contract review, producers can transform from policy peddlers to trusted risk advisors, securing larger accounts and building long-term client relationships.

Want to level up your contract review skills? Check out Contract Risk Academy for expert training, tools, and templates to help you master contractual risk transfer and compliance.

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