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You’re hiring a contractor to do work at your property. Guess which loss exposure people most often forget about during project planning?  That’s right… it’s the potential third-party liability they face if something went wrong. People often think about and prepare for the potential liabilities coming from inside the company; that’s inherent to their operation. However, they often forget about the potential outside liabilities.

To prevent and mitigate loss, potential liabilities coming from the outside need to be considered for every project. As you know, your employees fall under your company’s workers compensation insurance; contractors do not. Therefore, when things go wrong due to problems created by the contractor; third-party liability can affect your continuing operation.

The best time to think about third party liability and exposures to your organization from contractors is during the project planning phase. Here are some things you can do to protect yourself and to mitigate your exposure (also see attached exhibits).

Be Safe!
Make sure the contractor understands that they have the primary responsibility for maintaining a safe working environment. Check to see that they have an acceptable safety program to keep the work area safe. Availability of a safety program should be a condition for bid acceptance. Require them to follow your  internal safety program. Let it be known you will stop the specific work operation or all work operations in the event that unsafe and or unacceptable conditions are not corrected within a reasonable amount of time.

Be Sure!
Utilize a pre-job safety and planning meeting to review all contract requirements, including safety responsibilities and make sure there is clear communication as to what you expect. The contractor’s written safety plan should be comprehensive enough for the work being done. With the wide variety of work that you may need done, risk can vary considerably. You wouldn’t expect a 50-page safety plan for an electrical contractor. Yet the contractor's plan should be comprehensive enough to address routine, normal exposures, or specific conditions associated with the work site. For example, how housekeeping is to be handled, procedures they intend to use to ensure personnel and equipment are utilized safely, work site isolation, orderly storage of equipment, etc. For low risk work where the exposure to hazardous conditions is remote, the quantity and scope of safety procedures will be less. At the same time you should require additional safety plans from bidders when the work involves high risk tasks.

Insure!
Don’t forget to get proof of insurance before you decide to hire your contractor. We suggest that you specify in writing that their first payment after you retain them is contingent upon receipt of their certificate of insurance, with your operation listed as “named insured.” Also, make sure the certificate of insurance comes directly from the contractor’s insurance agent.

Remember!
These guidelines go for all of your contractors, including white-collar ones. It makes no sense to relax on your requirement when you hire a lawyer, a computer consultant, or similar vendor-type workers. You need to confirm that they carry “errors and omissions” insurance. Going forward, protecting yourself from third party liability losses requires the same high level risk control from contractors as you would expect from your own internal staff.

Click on the links to these helpful checklists below to help protect you against liability:

Contractor Safety Checklist

Contractor Emergency Phone Contacts

Pre-Job Safety Meeting Documentation