How Can Contractors Protect Themselves From Costly Litigation?

If a contractor hires a subcontractor to complete any aspect of a job, he/she is acting as a general contractor.

Some things contractors should do include:

1. Always consult legal advice before entering into a contractual relationship.

2. Require each subcontractor to hold the contractor harmless for any acts of negligence, faulty workmanship or liability associated with the work of each subcontractor.

3. Require all subcontractors to name the contractor as an additional insured on their insurance policies, specifically the liability portion of the contracts. (With this provision, a subcontractor’s policy will respond to covered acts by the subcontractor. This typically includes costly attorney fees. This is an industry practice. The transfer of liability should include these items. )

4. Be sure all employees understand basic principles of construction law. The overall theme of these statutes is to provide a workplace that is a safe environment for employees and the general public.

5. Require all subcontractors to carry limits that are equal to the limits that the contractor has on his/her policy.

6. Require all subcontractors to provide certificates of insurance naming the contractor as an additional insured. (This practice provide peace of mind and evidence that coverage is in place. )

If a contractor is hired by others for a specialized skill or job, then he/she becomes a subcontractor.

Here are some things that should be done.

1. Always consult legal advice before entering into a contractual relationship. (A subcontractor needs to be aware of the liability being assumed through contracts.)

2. Carefully review contractual language with an attorney, especially the hold harmless agreement that transfers liability from the general contractor to the subcontractor.

3. Request to be added as an additional insured to the general contractor’s insurance policy.

4. Make sure that insurance programs are updated to remove general contractors for whom work is no longer being done.

5. Submit copies of any signed contracts to his/her insurance agent for underwriting review. AND ALWAYS REMEMBER, THE NAME OF THE GAME IS CYA!!!

To Your Success!
Rod