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Business and Financial Policies and Procedures

Insurance Requirements for Vendors FAQs

1. Someone told me that all the vendors we do business with must provide proof that they have liability insurance. Is this true?

The University requires vendors (and subcontractors) we do business with to carry liability insurance so the University will not be financially responsible for the vendor's negligence. Units that contract with vendors must be certain those vendors meet the University's insurance requirements where possible and financially feasible. Although vendors must carry insurance, the University may not always require evidence, or proof of insurance.

2. We're completing one of the standard contract forms which requires the vendor to have insurance. The vendor we're contracting with doesn't have insurance. What should we do?

Contact the University Office of Risk Management to determine if the vendor or activity is considered to be "high risk." A high-risk vendor must furnish the University certificates of insurance that meet our requirements. In some cases the University may require the Board of Trustees of the University of Illinois be listed as "Additional Insured."

If a vendor or activity is not considered "high risk," Risk Management may grant an exception.

3. With all the purchasing the University does why don't you pre-approve some vendors so we know the insurance requirement has been confirmed?

We have. We have contracts for bus and air charters, catering, and construction where the proof of insurance was part of the contract process. Select Bus Charters with Approved Insurance

4. We are in the process of signing a Professional and Artistic Services contract that is under $5,000. Do we need proof of insurance from this service provider?

It depends on the level of risk associated with the service being provided and the business structure of the provider. To assess the risk level of your provider, consult Section 17.1 - Consultants and Other Contractors for Professional and Artistic Services.

5. Do we need to worry about insurance requirements if we're using our campus purchasing to make a purchase.

No, when units purchase goods or services through their campus Purchasing Division, verifying insurance is part of the contracting process. Verifying vendor insurance can be easier if your unit consults its campus Purchasing Division when you first recognize you need the product or service. If you continue to have questions, contact the University Office of Risk Management.

6. Our unit is entering into a contract. The Purchasing Division tells us that the contractor will not agree to the contract's indemnification language. What does this mean and why is it important?

Indemnification means that if some thing or service we purchase causes personal injury or property damage, the vendor will "make it good." In other words, the vendor will pay when something they do puts a financial obligation on the University. It is important that the University not be held accountable for damage caused by one of our vendors. Following a process of risk identification and evaluation, University Legal Counsel may make modifications to the indemnification language.

7. Our unit is contracting with a consultant. Do we need to verify that the consultant carries insurance?

When the University enters into agreements with contractors, service providers, or vendors, they must have insurance. The University may require they show proof of liability and other insurance before goods are provided or service begins. For more information, consult Section 17.1 - Consultants and Other Contractors for Professional and Artistic Services. Your campus Purchasing Division usually makes the insurance verification a part of the contracting process. If you have questions, contact them.

8. If the company I need a certificate of insurance from says it is "self insured" what does that mean?

Large companies typically are self insured. When evaluating the acceptability of a self-insurance program, the University may request a recent audited financial statement and description of how the self-insurance program is funded. If the company has the financial resources to guarantee payment when the law imposes such liability, we will accept a liability coverage statement signed by an authorized corporate officer.

9. Our unit wants to charter a commercial airplane. How do we make sure they have adequate insurance?

Contact your campus Purchasing Division before you enter into an agreement for air charter services.

Related Policies and Procedures

Select Bus Charters with Approved Insurance
Section 17.1 - Consultants and Other Contractors for Professional and Artistic Services

Last Updated: January 31, 2011 | Approved: Senior Associate Vice President for Business and Finance | Effective: November 2010

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