How to Manage Risk Before You Start the Job

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Due to the increasingly litigious nature of society, contracting for performance of services of any kind has become more complex, and requires a pre-planned risk management strategy to combat liability exposures that a contractor can face. In order to properly manage these risks, a contractor must understand them. A company focus on performance of the services and accounts receivable are important. To have a true 360 degree risk management strategy, however, a company also needs to focus on pre-service preparation and planning. This article discusses some of those pre-event management processes.

Employee Training and Documentation

Companies should ensure that their own employees are trained on work site safety and regulations.    If you are providing manuals, ensure that there is a sign off for each employee confirming receipt and review of the materials. A company should also maintain documentation detailing employee training sessions/seminars, who attended, and some type of sign in/out sheet.

Proper training and documentation can increase competence, and decrease costs associated with workplace accidents and other third-party liabilities.

Investigate the Other Party to the Contract

Prior to negotiating a contract with another party, especially a sub-contractor, it is prudent to engage in a screening process. Such efforts will help you combat negligent hiring claims that can be raised during the course of litigation. Engage in dialogue with the subcontractor and obtain reasonable answers to important questions involving topics such as: any gaps in their servicing of sites, how many sites they serviced per year, and whether they have the manpower, equipment and resources to account for their volume and task assigned. Obtain references from the contractor and verify the servicing history they provide. Along the same vein, do your own research on the contractor via online searches and publicly available court dockets to determine whether the contractor has ever been involved in prior litigation.

Contract Language

When negotiating the contract, whether you are the contractor interacting with the property management company/owner, or the subcontractor interacting with the general contractor, there are a few provisions to which one should pay close attention.

Firstly, and most importantly, the contract should be in writing and executed by both parties. To that end, there should be explicit language in the contract stating that the written document contains all material parameters agreed upon by the parties. In other words, there should not be any oral terms to the contract that are not also contained in writing.

Secondly, the contract should contain well-defined scope of service and payment terms. The scope of work should define specifically how, when and where the professional will perform operations. Vagueness and ambiguity in the scope of services becomes all the more problematic when parties have to provide testimony several years after the services were completed.

Thirdly, a well-crafted and negotiated indemnification clause further protects parties from being held responsible for the negligence of others. Risk transfer should be fair, and a contractor should not be taking on the liability of another party.

The more ambiguity in the contract, the more you are at the mercy to testimony of other parties during a lawsuit filed years after the accident’s occurrence.

Pre-Event Site Inspections and Meetings

A thorough walk-through of any site is crucial for determining the parameters of the job. Insuring the scope of work and the walk-though of the site are aligned will be a key factor in analyzing liability in a personal injury or property damage action. During the walk through, be sure to record any pre-existing defects and oddities on the site, i.e. defective gutters, roofs and downspouts; other building defects; improper slope/drainage; and depressions and potholes, will help during the litigation process to refute any self-serving testimony from other parties that might occur. Once it is recorded and the true scope of services is understood by the parties, the contract should be amended to remove contractor liability for any defective conditions on the premises.

Pre-service risk management strategies should be an integral part of any contractor’s business model. Having such safeguards in place will serve to mitigate risk, but also insure product quality.

Courtney Mazzio is an associate at the law firm of Freeman, Mathis & Gary. Joshua Ferguson is a partner at the law firm of Freeman, Mathis & Gary. For additional questions, please contact Josh or Courtney at jferguson@fmglaw.com or cmazzio@fmglaw.com.

 

 

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