[HCoop-Discuss] Insurance term

[Nathan Kennedy]

I got this response from Woody:
> No. 19- comes up all the time. I have been with P1 for almost 5 years now
> and we have never requested proof of insurance. We do not change our 
> Terms
> but rest assured that we have never asked for proof.  
Basically it sounds like they are either using a form contract and they 
are minimizing their legal expenses or their lawyers are being 
assholes.  If we were a bigger client then we could probably negotiate 
this term out, but since we are small and the facility is filling up, it 
wouldn't be worth their while to even ask a lawyer about it.  They are 
offering the terms as is.

So at this point, we are stuck with a liability insurance term in the 
contract that they do not enforce.  Some googling around has found this 
exact form term in a number of provider's agreements, who do not enforce 
it mostly, although *most* do the right thing and do not include this term.

Backing out now would be a huge pain and would require us to start from 
scratch.  It pisses me off that we are faced with this option at this 
point in the game, and the lesson for me in the future is to ask for the 
exact terms with the quote and compare them from the outset so we can 
ask these kinds of questions during the selection phase.

As to the implications of this term in the contract:
1. There is a threshold question as to whether the term has been waived 
by Peer1.   I think the fact that they admit that they have never asked 
for proof of insurance even though the term expressly says that they 
require it makes it obvious that they have waived this term, and so it 
is effectively void.  That's just my second-year-of-law-school opinion, 
for what it's worth.  Frank could weigh in with his 
second-year-of-law-school opinion too, perhaps he has had more than two 
semesters of contract law.
2. If a court determined that the term was in fact enforceable and NOT 
waived, we are in a different situation.  Obviously if all goes well it 
would make no difference since they aren't enforcing it and it would 
never end up in court anyway.  If it did, there are two scenarios.
    A. We claim they are breaching the contract for whatever reason and 
insist on some remedy.  Their lawyers can be clever and say that we 
breached an express term of the contract first by not having insurance, 
and so they were entitled to breach.  There are additional defenses we 
could raise based on their lack of action on the breach, but if I was 
wrong about (1), this is a potential concern.
    B. Peer1's datacenter catches fire and burns down, and they claim 
that it our fault because our equipment started the fire, and we owe 
them a million dollars.  In this case, the existence of the term makes 
no difference, because in fact we don't have any insurance, and either 
way we're pretty screwed whether it's our fault or not because our 
equipment is wasted.  If they won a lawsuit against us it could bankrupt 
the cooperative, but this is an unlikely scenario that has nothing to do 
with this contract term anyway.

Under the totality of these possibilities, I think we should go ahead.  
I will read the terms over one more time carefully to make sure there's 
no other surprises first.  And I am emailing Adam about the payment 
authorization.

-ntk