By Andrew Wipke & Jennifer Fox
Assistant County Attorneys in Fort Bend County
One aspect of drafting or reviewing contracts includes adding or revising insurance provisions. In larger, more urban counties, the decision whether to incorporate or modify insurance provisions in a contract may rest with a risk management department or similar internal entity. These larger counties often previously developed insurance provisions tailored for certain agreements, such as those for construction or vendor services on county property.
However, in other jurisdictions, this process may not be as streamlined. Having worked across five separate counties, the authors have experienced that in smaller jurisdictions, risk management departments are often nonexistent, and little guidance is established to ascertain what insurance provisions should ultimately be incorporated into a given agreement. Rather, this decision may be left to the sole discretion of the attorney reviewing the contract.
This article is not a primer on contract drafting.[1] Instead, it provides a general overview of common insurance provisions and potential provisions to consider incorporating into an agreement regarding insurance. As such, the authors acknowledge this article is generally directed to practitioners in smaller jurisdictions and includes information we wished we learned when previously employed in more rural counties.
Threshold inquiry
There are many types of insurance and insurance coverage. Broadly construed, insurance “is a contract by which one party for consideration assumes particular risks on behalf of another party and promises to pay him a certain or ascertainable sum of money on the occurrence of a specified contingency.”[2] A requisite component of an insurance contract is the shifting or distribution of risk.[3]
Not every governmental contract will require insurance coverage. Rather, insurance provisions in certain agreements are unwarranted. For example, if a vendor is shipping television mounting brackets to your jurisdiction, insurance provisions are probably not needed. However, if the same vendor is shipping and then installing these brackets on your property, insurance provisions may be necessary to ensure that any personal injuries or property damage resulting from their work is covered.
Among other factors, when determining whether any insurance provisions should be included in an agreement, consider what liability the agreement will impose on your county. Specifically, consider the following:
1) Does the other party carry adequate insurance to cover their risks while performing under the contract? and
2) Does your jurisdiction carry any applicable insurance coverage, or is it sufficiently self-insured concerning the services to be performed under the contract?
If your answers indicate insurance is needed to better protect your jurisdiction from any risks associated with an agreement, then consider evaluating the following items before finalizing your agreement.
Self-insurance
In the context of insurance, you often hear a county or another governmental entity is self-insured. An entity that elects to self-insure “must pay all judgments or settlements arising out of any and all claims asserted against it as well as all related loss adjustment expenses.”[4] Governmental entities are often self-insured. As such, an entity will typically set aside funds from which claims will be paid to protect the entity against loss,[5] as opposed to paying premiums[6] to transfer those risks to a third-party insurance company.
Occasionally, a vendor may stipulate that a county must maintain certain insurance coverage. Your county may indeed carry insurance coverage.[7] The purchasing or risk management department should be able to provide additional information concerning any existing policies and coverage. However, as appropriate, consider informing the vendor that the county is self-insured; thus, any requirements to maintain insurance coverage should be waived in the agreement. Further, the Texas Tort Claims Act governs relief for property damage, personal injury, and death proximately caused by the wrongful act or omission of county employees acting within the scope of employment.[8]
Conversely, after presenting a vendor with your required insurance provisions, the vendor may seek to waive these provisions on the grounds that it is self-insured. Proceed with caution. Some vendors do not possess the requisite financial assets to cover any liability imposed by the underlying contract. If your jurisdiction will permit a contractor to rely upon his self-insured status, consider requiring the vendor to formally attest (or prove) that he possesses sufficient financial assets to cover any exposure under the contract. This measure serves as a safeguard to ensure that a claim of “self-insured” status is substantiated and mitigates the risk of a county incurring unforeseen liabilities.
Language of insurance policies
Insurance policies are construed pursuant to the same rules that are applicable to contracts in general,[9] including enforcing the expressed intent of the parties.[10] Insurance terms are construed according to their ordinary meanings unless the insurance policy indicates that the words were utilized in a different or a more technical sense.[11] Provisions in insurance policies are not read in isolation; rather, you should examine the entire policy and seek to harmonize and give effect to all provisions.[12] As such, the most important aspect about an insurance policy[13] is that one must review the entire policy. Each one is unique. Common provisions in insurance policies are included below.
Declarations. A declaration is a statement or document that outlines specific details about an insurance policy. It often includes essential information such as the type of coverage and coverage amount, the policyholder’s name, the policy period, and any endorsements or exclusions concerning the policy.[14]
Endorsements. An insurance endorsement is “an amendment or addendum to an insurance policy.”[15] An endorsement often modifies or clarifies coverage in the underlying insurance policy.
Additional named insured. An additional named insured is someone who is not initially named as an insured in the existing insurance policy but was added to the policy by an endorsement or other agreement.[16]
Subrogation. Subrogation occurs when “‘one person is allowed to stand in the shoes of another and assert that person’s rights against’ a third party.”[17] Essentially, when an insurer pays a loss under the insurance policy to its policyholder, the insurer can assert any legal rights and remedies that belonged to the policyholder against a responsible third party concerning any loss encompassed by the insurance policy.[18]
Indemnity. Indemnity concerns a shift in responsibility regarding the payment of damages[19] and safeguards against existing or future liability for loss or injury.[20] An indemnity clause “allocates the risk of loss or injury resulting from a particular venture between the parties to the agreement.”[21] Essentially, indemnity is the right of an injured party to seek reimbursement “for its loss, damage, or liability from a person who has such a duty” concerning reimbursement.[22] Indemnity obligations may be created via agreements but for such provisions to be effective, they must satisfy the fair notice requirement to ensure clear intent and conspicuousness.[23]
Claims made or occurrence basis. When reviewing insurance documents, you may see insurance that is provided on a “claims made” basis or on an “occurrence basis.” Both claims made and occurrence policies generally require that prompt notice of a claim must be given to the insurer as soon as possible under the circumstances.[24] A claims made policy “is triggered by the presentation of the claim” to the insurer and provides coverage for claims that are asserted against the insured.[25] However, a claims made policy often requires the claim to be presented within the policy period.[26] Consequently, if a claim is made after the date of termination of the policy, then the claim likely will not be covered.[27]
In contrast, an occurrence basis policy “covers all claims based on an event occurring during the policy period, regardless of whether the claim or occurrence itself is brought to the attention of the insured or made known to the insurer during the policy period.”[28]
Claims made policies are generally cheaper than occurrence policies, because the insurer is better able to calculate risks, as exposure to claims terminates at a specified point, usually the date when the policy ends.[29] If the underlying contract entails risks that may evolve into claims in the future, then an occurrence policy may be the better alternative to consider. As there are differences between these types of coverage, consider specifying whether insurance policies provided under the agreement will be written on an occurrence or claims made basis. If your contract will permit insurance on a claims made basis, consider requiring the vendor to maintain coverage for an additional period of time, such as extending coverage for a time after expiration of the agreement. This will help ensure that applicable risks are better mitigated.
Provisions to incorporate
Limit insurance from certain companies. When requiring companies to maintain insurance coverage, it is advisable to limit the companies from which they may procure their insurance coverage. Insurance should be procured only from reliable and financially stable firms, which helps ensure that applicable claims are paid.
A.M. Best is a credit rating agency;[30] it grades an insurer’s ability to pay out claims and other financial obligations. A.M. Best grades insurance corporations on a ratings scale from A++ through D.[31] In your agreement, specify a minimum insurance rating for an insurance provider, as the reliability of an insurance provider is paramount. An insurer’s most fundamental obligation is to either reimburse the insured for direct losses or to cover sums the insured is legally obligated to pay to others.[32] A more financially stable and reputable insurer is better positioned to fulfill its duty to indemnify if a claim arises. Further, specifically require the insurance provider to be licensed or approved to transact business in the State of Texas.[33]
Control additional costs. In other agreements, a county will seek to limit additional costs. The same principles apply with insurance-related provisions. Inform the vendor that all costs of any insurance premiums or deductibles remain the sole responsibility of the vendor, and there are no county funds available for the procurement of insurance. The contract should include all applicable costs for the vendor to perform the requisite services.
Waive subrogation. Consider incorporating a waiver of subrogation. These clauses are designed to streamline risk allocation and minimize litigation by preventing an insurer, having paid a claim to its insured, from then seeking recovery from the other party to the contract.[34] Essentially, such waivers permit the contracting parties to mutually relieve each other from liability for property loss or damage to the work, to the extent that each party is covered by insurance.[35] This shifts the risk of loss to an insurer, as opposed to extended litigation between the parties, which might otherwise delay a project.[36]
Coverage provisions. At contract execution or shortly thereafter, ask for applicable executed certificates of insurance. These will demonstrate all required insurance coverage. Further, you should require the contractor to maintain insurance coverage throughout the term of the agreement, and, depending on the type of the agreement (e.g., a construction agreement), certain provisions such as insurance and indemnification may need to survive the expiration or termination of a contract. So, additional language should be incorporated accordingly.
To help prevent any lapse with insurance coverage, require the contractor to provide replacement certificates, policies, and/or endorsements for any such insurance expiring prior to completion of the services. Further, consider requiring the contractor to provide notice of any insurance modifications (e.g., 30 days, etc.) and specify where the new insurance information should be submitted (e.g., the purchasing department, etc.). As applicable, contemplate adding a provision advising that the failure to maintain insurance coverage will be grounds for immediate contract termination.
If the agreement includes subcontractors, consider requiring them to maintain insurance of the same type and coverage as the vendor. Proof of insurance should be sent to the vendor and to the county. Proof of any renewed or replacement insurance coverage should also be produced upon the expiration, termination, or cancellation of any such policy. Further, the vendor should not allow any subcontractor to initiate work on any subcontract until the requisite insurance coverage for the subcontractor is obtained and approved.
Additional insured. Consider requiring the contractor to name your county as an additional insured on his insurance policies. This requirement is a fundamental risk management tool designed to protect and preserve a county’s interests. By securing additional insured status, a county can ensure that a contractor’s insurance will serve as the primary layer of defense and indemnity for claims arising from his operations or negligence. This safeguards any insurance policies a county may maintain and mitigates the financial burden of potential litigation. Counties generally do not seek additional insured status for workers’ compensation or professional liability coverage, as this type of coverage typically applies to the contractor’s employees or specialized professional services, respectively.
Certificate of insurance. “A certificate of insurance is a document issued by or on behalf of an insurance company to a third party who has not contracted with the insurer to purchase an insurance policy.”[37] This certificate will provide evidence of the insurance policy and its general terms, including coverage types, the policy period, and any monetary limits.[38] It serves as tangible proof that the contractor has secured the required insurance coverage, assuring the county that appropriate protections are in place before work begins and throughout the contract term. It also helps verify compliance with contractual insurance provisions and mitigates the county’s exposure to uninsured risks.
Types of insurance to include
Common insurance types to consider requiring in your contract include:
Commercial general liability. Commercial general liability insurance policies are broad general policies[39] designed to cover the insured for damages caused by covered injuries to third parties, including the general public, as a result of the insured’s business operations.”[40]
Errors and omissions professional liability. An errors-and-omissions policy is a type of professional-liability insurance “designed to insure members of a particular professional group from the liability arising out of a special risk such as negligence, omissions, mistakes, and errors inherent in the practice of the professions,”[41] such as architects, engineers, and certified public accountants.
Umbrella or excess insurance. Umbrella or excess insurance provides protection beyond the limits of primary insurance policies. It covers catastrophic losses that exceed the coverage limits of underlying policies, including automobile liability, homeowners, or commercial general liability (CGL) policies.[42]
Cyber insurance. Cyber insurance protects businesses and organizations from losses and liabilities occurring from cyber attacks, data breaches, or related incidents. It may cover costs such as data recovery, breach response, ransomware response, and cyber extortion.[43]
Business automobile liability coverage. Business automobile liability insurance seeks to protect against losses stemming from the operation or ownership of a motorized vehicle.[44]
Workers’ compensation insurance coverage. Workers’ compensation insurance pays for medical bills and some lost wages for employees who are injured on the job or have a work-related illness.[45]
Performance bonds. While not insurance, a bond is a type of financial instrument involving a promise to pay money at a future date (often with interest) if certain circumstances occur.[46] Note that if your contract concerns the construction of public works and exceeds $50,000, then the contractor will be required to execute a payment bond.[47] A payment bond protects those “who supply labor and material”[48] concerning the construction of the public works contract, because public property is protected from forced sale and is not subject to a mechanic’s lien.[49]
Final thoughts
Perhaps the most inopportune time to ascertain what insurance coverage was negotiated (or should have been negotiated) in an agreement is after an insurance-related event is triggered. Insurance-related provisions regularly arise in agreements, so the incorporation of applicable insurance provisions into contracts is important. These provisions may better protect your jurisdiction from associated risks and liabilities. By understanding the various types of insurance and associated terminology, county practitioners may transform this aspect of contract review into a less dauting process.
[1] Other TDCAA articles examine those topics. See generally Bushra F. Khan, “Government contracts—let’s negotiate,” The Texas Prosecutor (May–June 2024) at 16; Amy Davidson, “The civil approach to confronting a government contract,” The Texas Prosecutor (January–February 2023) at 23.
[2] See Stewart Title Guar. Co. v. Cheatham, 764 S.W.2d 315, 318-19 (Tex. App.—Texarkana 1988, writ denied). Specifically, insurance is an “undertaking by one, party, usually called the ‘insurer,’ to protect the other party, generally designated as the ‘insured’ or ‘assured,’ from loss arising from named risk, for the consideration and on the terms and under the conditions recited.” McBroome-Bennett Plumbing, Inc. v. Villa France, Inc., 515 S.W.2d 32, 36 (Tex. Civ. App.—Dallas 1974, writ ref’d n.r.e.).
[3] See Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 211 (1979); Steere Tank Lines, Inc. v. United States, 577 F.2d 279, 280 (5th Cir. 1978).
[4] Mark W. Flory, et al., Know Thy Self-Insurance (and Thy Primary and Excess Insurance), 36 Tort & Ins. L.J. 1005, 1006 (2001).
[5] See generally Health Ins. Ass’n of Am., Inc. v. Shalala, 23 F.3d 412, 414-15 (D.C. Cir. 1994). See also Tex. Att’y Gen. Op. GA-0327 (2005). The term self-insurance is actually a misnomer, because “a self insurer does not provide insurance at all.” Hertz Corp. v. Robineau, 6 S.W.3d 332, 336 (Tex. App.—Austin 1999, no pet.).
[6] See Black’s Law Dictionary (12th ed. 2024) (Defining premiums as the “amount paid at designated intervals for insurance; esp., the periodic payment required to keep an insurance policy in effect.”).
[7] See generally Tex. Loc. Gov’t Code §§157.002, .041–.043, .101; 172.005 (2025).
[8] Tex. Civ. Prac. & Rem. Code §101.021 (2025).
[9] Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Crocker, 246 S.W.3d 603, 606 (Tex. 2008); State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex. 1995).
[10] See generally Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994).
[11] See generally Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d 734, 736 (Tex. 1990); Sec. Mut. Cas. Co. v. Johnson, 584 S.W.2d 703, 704 (Tex. 1979).
[12] See generally MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999). See also, “No one phrase, sentence, or section [of the policy] should be isolated from its setting and considered apart from the other provisions.” Forbau, 876 S.W.2d at 134.
[13] An insurance policy is an agreement “between the insurer and the insured, by which each party becomes bound to perform the obligations assumed in the policy of insurance.” Id.
[14] See generally Safeway Managing General Agency for State and County Mut. Fire Ins. Co. v. Cooper, 952 S.W.2d 861, 867 (Tex. App.—Amarillo 1997, no writ).
[15] Black’s Law Dictionary (12th ed. 2024).
[16] W. Indem. Ins. Co. v. Am. Physicians Ins. Exch., 950 S.W.2d 185, 188-89 (Tex. App.–Austin 1997, no writ). In contrast, an “additional insured is a party protected under an insurance policy, but who is not named within the policy,” such as employees or household members. Id. at 188-89.
[17] US Airways, Inc. v. McCutchen, 569 U.S. 88, 97 n. 5 (2013) (internal citation omitted).
[18] Black’s Law Dictionary (12th ed. 2024).
[19] Lee Lewis Constr., Inc. v. Harrison, 64 S.W.3d 1, 20 (Tex. App.—Amarillo 1999), aff’d 70 S.W.3d 778 (Tex. 2001).
[20] Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W. 2d 505, 508 (Tex. 1993).
[21] Whitson v. Goodbodys, Inc., 773 S.W.2d 381, 382–83 (Tex. App.—Dallas 1989, writ denied).
[22] Black’s Law Dictionary (12th ed. 2024).
[23] The Texas Supreme Court has clarified that “fair notice requirements include the express negligence doctrine and the conspicuousness requirement, which provide that a party seeking indemnity from the consequences of that party’s own negligence must express that intent in specific terms within the four corners of the contract and it must appear on the face of the [contract] to attract the attention of a reasonable person when he looks at it.” See Dresser Indus., 853 S.W.2d 508.
[24] See generally Prodigy Commc’ns Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374, 379 (Tex. 2009).
[25] Columbia Cas. Co. v. CP Nat., Inc., 175 S.W.3d 339, 344-45 (Tex. App.—Houston [1st Dist.] 2004, no pet.) (internal citation omitted).
[26] Prodigy Commc’ns Corp., 288 S.W.3d 374 at 379.
[27] See generally Yancey v. Floyd West & Co., 755 S.W.2d 914, 918, 920-21, 925 (Tex. App.—Fort Worth 1988, writ denied).
[28] Id. at 918 (internal citations omitted).
[29] Id. at 923.
[30] Information About Best’s Credit Ratings, https://web.ambest.com/ratings-services/information-about-bests-credit-ratings.
[31] See generally Guide to Best’s Credit Ratings, https://web.ambest.com/ratings-services/information-about-bests-credit-ratings.
[32] In re Farmers Tex. Cnty. Mut. Ins. Co., 621 S.W.3d 261, 270 n.3 (Tex. 2021) (orig. proceeding).
[33] Texas Department of Insurance, /www.tdi.texas.gov/ pubs/consumer/cb022.html (Texas law generally requires most insurance companies and insurance-related businesses to have a license to sell their products or services).
[34] See Trinity Universal Ins. Co. v. Bill Cox Const., Inc., 75 S.W.3d 6, 13 (Tex. App.—San Antonio 2001, no pet.) (explaining the purpose of waiver of subrogation provisions in construction contracts to eliminate lawsuits by protecting parties with insurance); TX. C.C., Inc. v. Wilson/Barnes Gen. Contractors, Inc., 233 S.W.3d 562, 571 (Tex. App.—Dallas 2007, pet. denied) (same).
[35] Id.
[36] See generally Tokio Marine & Fire Ins. v. Emp’rs Ins. of Wausau, 786 F.2d 101, 104 (2d Cir. 1986); Behr v. Hook, 787 A.2d 499, 503 (Vt. 2001).
[37] Republic Vanguard Ins. Co. v. Mendez, No. L-05-174, 2008 WL 11502055, at *9 (S.D. Tex. Mar. 31, 2008).
[38] See generally Black’s Law Dictionary (12th ed. 2024).
[39] Seger v. Yorkshire Ins., 503 S.W.3d 388, 402 (Tex. 2016).
[40] Id. (internal citations omitted).
[41] Venture Encoding Service, Inc. v. Atlantic Mut. Ins. Co., 107 S.W.3d 729, 736 (Tex. App.—Fort Worth 2003, pet. denied) (internal citation omitted).
[42] See generally Sidelnik v. American States Ins. Co., 914 S.W.2d 689, 693-94 (Tex. App.—Austin 1996, writ denied).
[43] See generally Tex. Transp. Code §201.712 (2025).
[44] See generally O’Connor’s Texas Causes of Action Ch. 13-A §2 (2025 ed.).
[45] See Texas Department of Insurance. What is workers’ compensation? https://www.tdi.texas.gov/wc/dwc/ about.html.
[46] See generally Univ. of Houston Sys. v. Ground Tex. Constr., Inc., 650 S.W.3d 832 (Tex. App.—Houston [14th Dist.] 2002, pet. filed).
[47] Tex. Gov’t Code §2253.021(a)(2), (c) (2025).
[48] Chilton Ins.v. Pate & Pate Enterprises, 930 S.W.2d 877, 887 (Tex. App.—San Antonio 1996, writ denied).
[49] Capitol Indem. Corp. v. Kirby Rest. Equip. & Chem. Supply Co., 170 S.W.3d 144, 147 (Tex. App.—San Antonio 2005, pet. filed). Depending on the dollar amount of the project, the contractor may be required to execute a performance bond. Tex. Loc. Gov’t Code §262.032(a) (2025); Tex. Gov’t Code §2253.021(a)(1), (b) (2025). A performance bond protects the government regarding performance of the contract. See generally Parliament Ins. Co. v. L.B. Foster Co., 533 S.W.2d 43, 47-48 (Tex. Civ. App. 1975).