Why Tracking Privity is Important for Our Clients and Their Vendors

Overview

Tracking privity is essential for ensuring compliance with our clients' contractual requirements. This article explains what privity is, why it must be avoided in insurance forms, and how vendors can ensure compliance.

What is Privity?

Privity of contract means that only the parties who have signed a contract have legal rights and responsibilities under it. This ensures that agreements are enforceable only between those directly involved. However, privity is not limited to just these examples. It can take different forms, and its presence may not always be explicitly stated using the phrases outlined below.

Why Do Our Clients Require Privity Tracking?

Our clients require that privity not be included in insurance forms. If privity is found, the form will be marked non-compliant. This is because:

• Our clients do not want coverage limited to contract signers – including privity may exclude necessary parties.
• Privity clauses can restrict coverage in unintended ways – using limiting language may create gaps in protection.
• Compliance with this requirement is contractually mandated by our clients.

Key Phrases That Indicate Privity (Non-Compliant Language)

If your insurance form includes any of the following phrases, it will be marked non-compliant:

• "With whom you have a written contract" – This restricts coverage only to contract signers.
• "Any person or organization when you and such person have agreed in writing" – This creates a privity-based limitation.
• "Where required by written contract" – This restricts coverage to explicitly mentioned parties.

The above list does not provide a full list of verbiage that implies privity. They are just a few examples of phrases that imply privity. If an agent sees a flag for privity and does not find the exact wording above, they should still assess whether restrictive language exists that limits coverage to contract signers.

Example of Phrases That Do Not Indicate Privity (Compliant Language)

To ensure compliance, use broader, inclusive language such as:

• "For whom you are performing operations" – This does not require a direct contract.
• "Any person or organization for whom the insured has agreed by written contract to furnish this waiver" – This ensures flexibility in coverage.

How This Affects Vendors

As a vendor, if your insurance forms contain privity language, they will be rejected as non-compliant. To prevent this, work with your insurance agent and carrier to ensure forms do not include privity. They can do this by:

• Removing restrictive privity language from insurance forms before submission.
• Using inclusive wording to ensure all required parties are covered.
• Providing different editions or forms that do not contain privity language if needed.
• Ensuring compliance before submission to avoid delays in approval.

By avoiding privity language in insurance forms, you help our clients maintain proper coverage and prevent unnecessary rejections. This requirement is not arbitrary; it is a contractual obligation set by our clients to ensure broad and appropriate insurance coverage.

Need Help?

If you have any questions or need assistance with privity compliance, please contact our support team for further guidance.