CONTRACT LIABILITY
BY: PAUL MATTES
STERLING INSURANCE GROUP
CONTRACT LIABILITY:
Knowing When It Isn’t On You
W
hen it comes down to
it, business is based on
contracts, especially
in the construction
industry. Whether
written or verbal, some agreement is going
to be reached which spells out the scope
of the work being done, how insurance
should be handled, and everything else.
Unfortunately, a lot of contracts are
approached in a free and haphazard way.
Who can blame contractors who see a job
and jump into it without a second thought?
The problem, of course, is the potential
risks and liabilities which open up when
contracts aren’t examined closely.
During construction, contractual risk
transfer is the norm. It’s how an owner
transfers responsibility to an architect, to
contractors, then to subcontractors, and so
on. Let’s go over a few examples of how this
might work.
An architect designs a house and the design
itself leads to an unstable home after it
is built. Is the builder responsible? The
architect? How about if a subcontracted
carpenter drops a piece of lumber on
a homeowner. Is the subcontractor
responsible or the general contractor of the
job? These are the kinds of issues spelled
out in contracts, and these types of issues
are vitally important.
Here are two key takeaways that you
should pay attention to when it comes to
contract liability.
DON’T JUST RUN IN AND SIGN THE
CONTRACT WITHOUT HAVING A
PROFESSIONAL LOOK OVER IT FIRST
The sound of a “yes” can be very appealing
for many contractors (and any other
business owners). The allure of that sound,
however, needs to be tempered with a dose
of reality. Don’t sign anything without
looking it over first and making sure
everything is applicable. Often, boilerplate
contracts are used which may not even
apply to your company or the job on which
you are going to be working. Contracts
have room for negotiation, and that should
be taken full advantage of during and after
the bidding process.
KNOW HOW TO HANDLE
VENDOR CONTRACTS
For many contractors, especially general
contractors, anyone you bring in to help
on the job is going to be another risk you
are taking on. Not only do you need to vet
these subcontractors in terms of the kind
of work that they do, but you also need
to ensure they have their own insurance
which covers them in case of an accident.
Work with your insurance professional to
make sure your own contracts have “hold
harmless” language and indemnification
clauses so that, should something go wrong
with a subcontractor, they are the ones
who are held responsible and not you.
Contracts can be simple or they can be
unbelievably complex. When you get
down to brass tacks, it pays to have a
professional go over your contracts and
spend the time and effort to customize
them to each client. A boilerplate contract
is better than nothing, but not by much,
and it won’t be as ironclad as something
specific would be.
Does your company spend enough time on
contracts? Need a little assistance moving
forward? Contact Paul at 586-685-0113
or [email protected] for more
information. +
Paul Mattes is the Vice President of Sterling Insurance Group. Joining the agency in 1998 and
partnering with Joe Haney as Principal, Paul has been dedicated to instrumental growth of the
firm. Using his CIC, LIC, CRM, CRA, CBWA and CAWC knowledge paired with over 28 years of
experience, Paul works with clients in various industries to prepare solid Risk Management and
Employee Benefits programs tailored to meet their needs. Contact him at pmattes@sterlingagency.
com or (586) 685-0113.
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