Imagine you are waiting for the elevator at your elderly/disabled site, when you hear a loud bang. As the elevator doors open you see two residents looking confused and clearly in pain. There is a large piece of the ceiling lying broken on the floor. It seems as though the ceiling tile struck the residents and has caused a few minor cuts and bruises, but 911 has been called. While the emergency response team is checking on the residents, one word crosses your mind: lawsuit.

General Liability incidents take place every day at PHAs across the country with many leading to thousands of dollars paid in settlements. Many of these settlements can be avoided with a proper contract between PHAs and independent contractors. A proper contract must include a Hold Harmless Agreement. According to the Nonprofits’ Insurance Alliance of California, Hold Harmless Agreements are defined as an agreement between two parties that obligates one party to protect another against certain risks of legal liability. With a Hold Harmless Agreement one party (the independent contractor) agrees to pay and defend claims brought against the other party (the PHA) as a result of the first party’s activities.

Review Maintenance Contracts

In this day and age PHAs are contracting out various maintenance activities. These activities may include landscaping, snow removal, elevator maintenance, or construction. When you enter into a contract it is highly recommended that you have your contract reviewed by a lawyer so that the PHA’s general liability and legal rights are protected. A lawyer will also ensure that your contract is valid for your individual state laws. The contract should be reviewed by an insurance representative to make sure that it does not breach the PHA’s insurance policy.

Remember to include these important points when preparing a hold harmless agreement:

• The agreement should be in writing and needs to clearly state the two parties that are entering into the agreement;
• The language of the agreement should include provisions to have the other party (the contractor) financially responsible for any liability, loss, or damage for claims arising from the contractor’s work;
• Coverage for the PHA’s defense costs must also be included in the agreement;
• The authority of the person signing the agreement should be verified;
• There should not be a limitation on the time in which one can make a claim; and
• The agreement should not have a termination date or the ability to be canceled without the proper notice.

Once an agreement has been approved and signed it is important to review any safety rules that may be specific to the housing authority. While the contractor is on site, the PHA must occasionally monitor the work site to confirm that the contractors are complying with the outlined safety regulations. Besides safety regulations, the PHA must monitor the independent contractors own insurance policy. To do this, the housing authority must be listed as the certificate holder on the policy. As a named certificate holder the PHA will be notified of any cancellations or changes to the contractor’s insurance policy.

While Hold Harmless Agreements are not the end all of future lawsuits, they can be helpful in protecting your PHA. Properly written Hold Harmless Agreements give housing authorities the ability to hire independent contractors with confidence and breathe a little easier. By contracting out certain maintenance procedures the PHA can focus its attention on other aspects of housing, such as unit turnover rate or resident safety. A pending lawsuit would not be a concern if the PHA in the beginning of this article had a properly written Hold Harmless Agreement. Any claims that may have stemmed from the elevator malfunction would have been handled and paid by the elevator contractor who signed the Hold Harmless Agreement.

If you have any questions or would like more information on Hold Harmless Agreements, please contact your HAI Group Risk Control associate at 800-873-0242.