Regardless of the size of your sweeping company, risk transfer controls are an important part of any sweeping contractor's risk management program.
When understood and used properly, insurance and its various forms protects sweeping contractors by insuring them against risks associated with their work. Just as importantly proper insurance assigns risk where it belongs and prevents others from transferring their risk to you.
Does this sound familiar?
You put together a bid package, obtain a certificate of insurance to be attached to the bid, which you submit and hope for the best. Then you are successful and win the bid. Good for you! You go to work, providing the sweeping service as specified in the contract. Upon completing the job you hopefully have maintained the almighty, ever-shrinking profit margin. After all, isn't that why entrepreneurs put everything on the line?
Now for the surprise! The job is complete, you made a profit, and you're on to conducting other business. Months pass and you receive a summons and complaint in the mail. Upon review, you are outraged that it involves an incident that you believe has nothing to do with the scope of work you were contracted to perform. You forward the claim to your insurance carrier under protest, with the belief that they should not award the claimant any damages.
You are deposed on the case, spending even more of your valuable time, and after all is said and done, you find that your insurance company settled the case and compensated the claimant. You know this action will undoubtedly have a negative impact on your insurance loss information, which could make it more difficult for your sweeping company to obtain the most competitive insurance pricing.
Unfortunately this scenario is commonplace in today's hurried business environment where in order to compete, a lot of things — important things — get overlooked.
What you need to know
But before you can tackle the best ways to protect yourself and your business, you need to understand just what these insurance documents mean. Only then can you know how best to implement them into your sweeping contracts without jeopardizing your ability to compete and/or impeding your insurance.
What is a Certificate of Insurance? This is a form issued by the contractor's insurance company (or its agent) which lists the coverage(s), expiration date(s), and limits. The certificate may also describe special endorsements — such as additional insured(s), waiver of subrogation, hold harmless, and/or special notice of cancellation endorsements — that have been added to the policy.
Certificates of insurance do not alter the terms or conditions of the policies it describes. If a certificate misstates a key point, or lists a coverage that doesn't exist, the policy's actual terms are the ones that will prevail.
What is a Hold Harmless Agreement? Also referred to as Indemnity Agreements, hold harmless agreements are non-insurance contractual agreements used to transfer risk from one party to another. They are often incorporated into construction contracts, service job contracts, purchase order agreements, lease agreements, and consulting agreements. There are three basic types of Hold Harmless Agreements:
- Limited: Party A holds Party B harmless, but only for the sole negligence of Party A, or for Party A's portion of concurrent negligence.
- Intermediate: Party A holds Party B harmless for negligent actions of Party A, and for Party B's portion of concurrent negligence. However, Party A does not hold Party B harmless for Party B's own sole negligence.
- Broad: Party A holds Party B harmless up to and including situations in which Party B is solely negligent.
What is a Waiver of Subrogation? A waiver of subrogation takes away a contractor's right to sue the owner or the general contractor in certain (or all) circumstances. If a sweeping contractor waives it's right to sue, that also affects the contractor's insurer because the contractor's insurer could have used that right to seek recovery from the negligent party for insurance claims paid to or for the sweeping contractor.