Use of Subcontractors
By Universal Underwriters Group's
Loss Prevention Department
A leak develops in the roof above the business
office and must be repaired immediately. The manager calls AA Roofing
Repair to come and fix the leak. The contractor shows up quickly,
but before any repairs are made one of their employees falls off
a defective ladder and is severely injured. Tough break for that
guy and his company you say? If this contractor doesn't carry workers
compensation insurance, it could end up being a disaster for your
Landscaping crews, window washers, plumbers, heating/AC
contractors and many assorted vendors may visit your business every
day. Have you ever considered them a threat to your business? The
fact is that you can be held liable for injuries to their employees,
or injuries to others that were caused by their employees. You could
also end up paying for damages to your property that the contractor
or vendor should be held accountable for.
The exposure created by using off-premises contractors
can be equally significant. Anytime contractors are hired to service,
change or modify vehicles or other mobile equipment, you could be
held liable for claims arising out of their completed work. Many
of these companies come and go, so it is important to choose contractors
wisely. After an incident occurs, it is often too late to find out
how long they've been in business, what kind of reputation they
have or to verify insurance (products/completed operations) coverage.
Reduce Your Exposure
Following these guidelines can help reduce the
exposure created by hiring contractors and subcontractors, or when
inviting vendors onto your property:
Contractors/vendors should provide certificates
of insurance as evidence of the following coverages: Workers compensation;
Commercial general liability; Automobile liability; and Umbrella
liability. Certificates should be mailed directly to you from the
insuring company or agency. The rule of thumb is that their limits
should be at least as high as yours.
Review the effective and expiration dates and
update the certificates as necessary.
Have your company added as an "additional insured"
on their general liability policy.
Require the contractor/vendor to sign an "indemnification
and hold harmless agreement."
Develop an "approved vendor list" and require certificates
of insurance for each vendor included on the list.
Select a contractor based on experience and expertise,
not solely on price.
Do not lend tools or equipment to contractors.
Injuries caused by defective equipment may be grounds for litigation.
Selecting a Contractor
Select a contractor based on: Expertise and experience;
A proven track record; and compliance with all standards and codes.
Before Beginning a Project
Arrange a pre-project meeting where you review:
Specific safety requirements for critical items; areas restricted
to contractor's employees; condition of equipment to be used by
contractor; and safety considerations for installation of major
Make sure all subcontractors are held to the same
standards as the general contractor.
It is equally important that you transfer risk
associated with contracts or agreements (e.g. sublet repairs). Require
liability insurance to fund the transfer of liabilities. Include
in all contracts a requirement that the other party add you to their
liability insurance as an additional insurance.
Having an approved vendor list in place will provide
guidance to employees under ordinary circumstances and in emergencies.
The best time for establishing a program for hiring contractors
and vendors is prior to an emergency. By using the above procedures,
the risk associated with the use of vendors and contractors will
be retained by those companies - where it belongs.
Gerry Cecil is the National Account Executive
for the Special Account Services division of Universal Underwriters
Group. For more information about how Universal Underwriters Group,
Special Account Services can help your automotive recycling business
needs call 800-840-8842, ext. 4845, visit www.uuic.com/specaccts/ara.asp
or email: email@example.com.