Are your trades putting you at risk?
Does your company utilize subcontractors to provide services for you or your customers? Would you be adequately protected should a loss arise as a result of your contractor’s actions?
Contractors or subcontractors are used for a number of reasons such as building and equipment maintenance, construction and renovations projects, etc. If you are not adequately protected and the contractor injures someone, injures themselves, or causes property damage, you may be stuck with the financial burden of making things right.
The following steps are precautions that should be taken to help minimize the company exposure to such a scenario.
Establish a written agreement between you and your contractor. Within the agreement the following points should be included:
- Ensure the contractor provides Workers Compensation Board (WCB) coverage for their own staff. If you hire a contractor or subcontractor without WCB insurance coverage, you will be held responsible for that worker if they are injured on the job. Ask your subcontractor for a clearance certificate from WCB Alberta. This letter will advise you if a contractor or subcontractor has a WCB account that is in good standing;
- Specify insurance requirements and limits in the agreement. As a general rule, it is suggested whatever your exposure is to loss, is the minimum coverage you would require. As an example, if contractors are hauling a product worth $2 million but they only have cargo insurance for $1 million, than that would not be enough to cover a total loss of that product. If you are still unsure how much coverage your contractors should have, please contact your insurance professional to discuss;
- Ask to see certificates of insurance. A certificate of insurance is a method of obtaining proof of the type of insurance, coverage limit and the insuring company the contractor has. The certificate should be obtained on an annual basis from the insurance company or the contractors’ broker or agent to ensure protection against receiving a falsified document. When new certificates arrive they should be reviewed to ensure coverage, limits and policy expiration dates are still acceptable to your agreement;
- Ask to be added as an additional insured on their policy. This will then extend the subcontractors policy to protect your company for liability arising out of operations performed by that subcontractor;
- Hold Harmless agreements should be included and worded to favour the company. The purpose of this agreement is to hold your company harmless under certain conditions. As an example, if a contractor is working on your roof and unsecured material injures someone below, that contractor will be responsible for the damages and not your company. Be diligent and have all Hold Harmless agreement wording reviewed by your legal counsel;
- If your contractor is using sub-trades how do you know whether they are following the same rules in the agreement you have with your contractor? To protect your company from liability, sub-trades should also sign the same agreement that you require of your contractor; and,
- Once a standardized agreement is generated, it should be reviewed by legal counsel to ensure it will be valid and binding. If there are any changes made to an agreement, it should then be reviewed again by your legal counsel.
Beyond the agreement, there are additional precautions you can take as a company to ensure the best protection against a contractor’s negligence such as:
- Investigating a contractors reputation through references or word of mouth;
- Reviewing the company quality control program (safety program) and determine who is responsible for ensuring compliance? It’s important to find out whether they follow not only their own safety rules, but to follow your company safety policies as well; and
- Monitoring contractors and enforcing safety regulations throughout the duration of a contract. By enforcing non-compliance, contractors will immediately ensure they follow rules for a safe workplace.
If you have any questions about risk management, give us a call today!