Reviewed by Tom Moore, Agency Partner, CA Agency Insurance License 6003355
Last reviewed: 3/19/2026
Key takeaway: Insurance liability in master service agreements can transfer financial risk to your business in ways your standard policy may not fully cover. Spokane business owners, consultants, contractors, and service providers should review indemnification clauses, additional insured requirements, and coverage limits before signing any MSA.
Most business owners focus on the revenue in a new contract. Few focus on the liability language buried inside it.
A Master Service Agreement, often called an MSA, sets the overall terms between you and a client. It governs multiple projects under one framework. That sounds efficient. The problem is that MSAs often contain insurance obligations that go far beyond what your current policy was designed to handle.
If you operate in Spokane and sign contracts with corporate clients, developers, healthcare systems, or regional enterprises, this matters more than you think.
Outline
What Is a Master Service Agreement
A Master Service Agreement is a contract that establishes the general terms and conditions for ongoing work between two parties. Instead of negotiating a new contract for every project, the parties rely on the MSA and attach project-specific statements of work.
MSAs typically address:
- Scope of services
- Payment terms
- Confidentiality
- Dispute resolution
- Indemnification
- Insurance requirements
The insurance section is where hidden exposure often lives.
For a general overview of contract basics, the American Bar Association provides useful educational resources.
How Insurance Liability Gets Shifted in MSAs
Two or three paragraphs in an MSA can dramatically expand your risk. Here are the most common clauses that affect insurance liability in master service agreements.
Indemnification Clauses
Indemnification requires one party to defend and pay for certain claims made against the other party.
Some MSAs require you to indemnify the client for claims arising out of your work, even if the client was partially negligent. Depending on wording, this can go beyond what your liability policy automatically covers.
Washington State regulates indemnity provisions in certain construction contracts. You can review general guidance through the Washington State Legislature. Always verify current law, as statutes can change.
If your policy excludes certain contractual liability beyond what you would owe under common law, you could face an uncovered loss.
Additional Insured Requirements
Many MSAs require you to name the client as an additional insured on your general liability policy.
That means your policy must extend coverage to protect the client for certain claims. This can:
- Broaden who is protected
- Increase the chance your policy pays first
- Impact your loss history
If the required endorsement is not properly added, you could be in breach of contract.
Spokane example:
A local marketing consultant signs an MSA with a regional healthcare provider. The agreement requires the provider to be named as an additional insured. The consultant never updates their policy. A claim arises tied to advertising content. The client demands defense under the contract. The consultant’s insurer denies coverage because the endorsement was never issued. Now the consultant is exposed on both the claim and a contract violation.
Waiver of Subrogation
A waiver of subrogation prevents your insurer from seeking recovery from the other party after paying a claim.
This clause can limit your insurer’s ability to recover money from a negligent client. If not properly endorsed, your policy may not honor that waiver.
The Insurance Information Institute explains subrogation principles.
Again, if your MSA promises something your policy does not allow, you carry the financial gap.
Why Standard Policies May Not Fully Cover MSA Risk
Many Spokane professionals assume, “I have general liability coverage, I’m fine.”
Not necessarily.
Commercial general liability policies often include contractual liability coverage, but typically only for what is called an “insured contract.” If the indemnity language goes beyond that definition, coverage can become uncertain.
Other issues include:
- Required limits higher than your current policy
- Professional liability requirements you do not carry
- Cyber liability clauses tied to data breaches
- Primary and noncontributory wording obligations
The Washington State Office of the Insurance Commissioner provides consumer guidance about coverage terms and responsibilities . It is a good starting point for understanding policy language, but business contracts require deeper review.
Spokane example:
A technology consultant signs an MSA requiring $2 million per occurrence in general liability and a separate cyber policy. Their current limits are $1 million, and they have no cyber coverage. A data incident occurs. The client points to the contract. The consultant’s coverage is insufficient, and the contract exposes personal assets if the business is thinly capitalized.
Real Spokane Scenarios Where This Becomes Expensive
Scenario 1: Construction Subcontractor
A Spokane subcontractor signs an MSA with a general contractor. The indemnity clause requires defense of the contractor for claims “arising out of or related to” the subcontractor’s work.
A worker from another trade is injured and alleges unsafe site conditions. The GC tenders the claim to the subcontractor under the MSA. Legal defense costs alone climb quickly.
If the policy does not align with the contract, the subcontractor pays out of pocket.
Scenario 2: Professional Services Firm
A financial advisory firm signs an MSA requiring professional liability coverage with specific retroactive dates and tail coverage provisions.
They later switch insurance companies without aligning the retroactive date. A claim arises tied to past advice. Coverage is disputed because the new policy does not cover prior acts as expected.
Scenario 3: Real Estate Development Agreement
A Spokane property investor signs a long-term MSA with a property management company. The contract shifts certain liability for tenant injuries.
A slip-and-fall occurs in a common area. Both parties dispute responsibility. Insurance carriers evaluate who assumed what obligation under the contract. If the contract language conflicts with policy terms, delays and coverage gaps follow.
These disputes are rarely simple. They often involve multiple insurers, attorneys, and contract interpretation.
How to Review an MSA Before You Sign
You do not need to become a lawyer. But you do need a system.
Insurance Checklist Before Signing
Before signing any MSA, review:
- Required coverage types
- Required limits
- Additional insured wording
- Waiver of subrogation requirements
- Primary and noncontributory language
- Notice of cancellation requirements
- Specific endorsement forms requested
Compare each item against your actual policy declarations and endorsements.
If the MSA requires something you do not carry, address it before signing. Not after a claim.
When to Involve Your Insurance Advisor
Involve your insurance advisor when:
- Contract limits exceed your current limits
- The MSA uses broad indemnity language
- Professional liability or cyber obligations are included
- You are unsure whether endorsements match contract language
At All Lines Insurance, Spokane business owners often send contracts for review before finalizing them. That proactive step prevents far larger financial pain later.
This is especially important for higher-income individuals who own investment properties, consulting firms, or professional practices. Contractual liability can reach personal assets if corporate protections are not maintained properly.
Contracts are not just legal documents. They are financial risk documents.
If you are signing client agreements in Spokane and want clarity on how your coverage aligns with your contractual obligations, it is time for a review. Send your Master Service Agreement to All Lines Insurance, and let’s make sure your protection matches the promises you are making.
Frequently Asked Questions
Does general liability automatically cover contractual liability?
Not always. Most policies cover liability assumed in an “insured contract,” but wording matters. Review your specific policy.
What is an additional insured endorsement?
It is a policy endorsement that extends coverage to another party, usually required by contract.
Can I ignore waiver of subrogation language?
No. If you agree to it contractually but your policy does not allow it, you create a coverage gap.
Are MSAs only for large corporations?
No. Many mid-sized Spokane businesses use MSAs for recurring services, construction, IT, and consulting.
Should my attorney review every MSA?
For high-value or high-risk contracts, yes. At minimum, have both legal and insurance perspectives aligned.
What if the client refuses to change the insurance language?
Then you must decide whether the revenue justifies the risk, or adjust your insurance to comply.
