Contractors often sign contracts all day long. But this risk transfer can significantly impact liability exposure to loss, increase risks and impact how your insurance policy is paid out in the event of a claim. Understanding total cost of risk, examining and managing risk exposures is one of the keys to the long-term success for businesses of all sizes.
Coterie Insurance can provide a suite of endorsements that make it easy. Our Additional Insured bundle enables small businesses, including contractors, who perform work for others to get the coverage they need to help comply with their written contractual agreements.
When you work with partners and other parties such as contractors, renters, component suppliers and service providers, you may be held accountable for their actions or negligence. And because your regular risk management procedures and insurance policies generally don’t cover others, you could be found liable for huge losses. In comes risk transfer.
How to protect yourself?
The best protection in these situations is to shift risk and liability away from your business and onto other parties. Thankfully, you can do this when you draft a formal business contract by including provisions, clauses and other text that determines exactly who is liable for specific scenarios and losses. This is generally referred to as contractual risk transfer and can include a wide range of provisions on liability. For example, a business could agree to be responsible for losses only when employees or customers are on the premises.
Because properly worded contracts are legally binding in court, they can help protect your business in the event of a loss or dispute. Additionally, contracts can contain insurance requirements, waivers and other types of risk transfer that give your business legal counsel or direct financial compensation.
Although contractual risk transfer is an effective way to protect your bottom line when working with partners and other parties, the practice itself may expose your business to significant risks.
Many states have laws that require specific legal language in order to make contractual risk transfer enforceable, and some states have outlawed specific types of contractual risk transfer altogether.
For more information, contact Coterie Insurance today.