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Tip of the Week: Licensor Required Insurance, by Andrew Richmond

In a license agreement, the licensor often requires the licensee to maintain various insurance policies and, for some of those policies, add the licensor’s name to the policy for the term of the agreement plus a post-expiration period.

Before entering a license agreement, a licensee should confirm with its insurance provider that the licensee: a) has in place (or can secure in a timely fashion) coverage for the licensor-required policies; b) has (or can secure) sufficient coverage to meet the licensor’s minimum (e.g., per occurrence) and maximum (e.g. aggregate) limits; c) can add the licensor as an additional named insured; and d) can provide certificate(s) of insurance to licensor within the licensor-proscribed time period. Below is a brief recap of the more common licensor-required policies:

General Liability: Comprehensive policy which covers contractual liability (covers insured in the event that insurer fails to perform under the contract); products liability (covers insured from liability that may incur as the result of some defect in insurer’s manufactured or sold product); property damage (covers insured from property damage from insurer’s defective product); and personal injury (covers insured against personal injuries from insurer’s defective product). Although some license agreements may not require general liability insurance, one or more of these components, most commonly product liability insurance, will be required.

Advertisers Liability: Covers insured against claims for libel, slander, defamation, infringement of copyright, invasion of privacy, etc., arising out of insurer’s advertising program, and may not be applicable if licensee does not advertise its licensed products.

Workers’ Compensation: Covers employees for any injury arising out of and in the course of employment. All states have laws that require such protection for workers and prescribe the length and amount of such benefits provided. A licensor will not require its name to be added to the licensee’s workers’ comp policy and this policy is less frequently addressed in the license agreement.

Errors and Omissions Insurance: Covers insured for mistakes made by non-medical professionals for business mistakes, and also less-frequently required.

“Tip of the Week,” is written by attorney Andrew Richmond, president of the Richmond Management Group, Inc. (RMG). Andy has more than 15 years of business and legal affairs experience with such companies as Fox, Hallmark, Jakks Pacific, and Sony. Currently, as president of RMG, Andy provides his clients with business and legal affairs representation, with a focus on licensing, promotions, marketing, and related matters.  Andy can be reached at andy@richmondmanagement.com.

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