To at least some degree, all contracts involve an allocation of risk between the parties to those contracts.
One of the most common methods for dealing with risk allocation in municipal contracting is by way of imposing insurance requirements on suppliers.
An insurance contract is a contract under which one person (called the insurer) agrees in consideration of money paid to him (called the premium) by another person (called the insured) to indemnify the latter against loss resulting to him on the happening of a certain event or to pay a sum of money or some other thing of value upon the happening of a certain event.
The basic components of an insurance contract are as follows:
The application in which the applicant for insurance will disclose the details of the risk that is to be insured;
the binder which provides temporary coverage to the insured pending the investigation of the…