A master service agreement usually contains detailed insurance requirements that service providers must comply with, including the obligation to lift and maintain certain types of insurance in specified amounts, the designation of the customer as supplementary insurance or insurance status, and the provision of confirmation documents attesting to their compliance. It is important that the insurance advisors of the client and the service provider understand the relationship between the parties, where and what services are provided, what types of services are involved and the allocation of risks between the parties. In many cases, insurance is the main source of funding for risks shared between the parties through the Master Service Agreement, such as for example. B certain compensation obligations. It is important to note that a customer`s insurance application does not serve as a guide for the service provider in terms of insurance coverage. This is because customer requests often focus on certain risk areas, often mentioned, while a service provider may require coverages (and much higher limits) that are not requested by a customer to protect themselves and their operation. A presentation of a service framework contract is often accompanied by insurance requirements as an exhibition, so that they can be more easily updated from one agreement to another depending on the services provided. On the other hand, a service provider may be an SME that involves a much larger business through a reseller or other relationship to provide licensed services or materials as part of a transaction. Often, the service provider does not have the leverage or practical ability to impose its negotiated terms on a much larger company than itself and, in some cases, it will not even be possible to bring them to the table to discuss the issues. In some cases, a restructuring of transactions may be necessary to allow the client to deal directly with the third party and, in some cases, clients may already have a framework contract with the third party that can be used as a platform for that part of the structure. Master service agreements typically contain indemnification rules as a risk-sharing mechanism between the customer and the service provider. In some cases, such as bodily injury and property damage, compensation is reciprocal. Some customer forms seek full compensation covering all possible breaches of the Master Service Agreement and the obligations arising from the specifications.
Service providers vigorously oppose this type of compensation and try to limit compensation – if not to bodily injury and property damage, to other potential risks, such as infringements of third parties` intellectual property rights. Whichever document is first exchanged, economic factors often push the parties to important or protracted negotiations. In addition, many service providers and clients have developed internal policies or SOPs that govern the types of terms they accept in master service agreements and statements of work, or certain provisions that would require the approval of a company representative with some degree of authority. . . .