Rural Water - Quarter 2, 2017 - 27
Protect Your Utility with
BY R. CHRISTOPHER BARGER, CPCU, CIC, AIM, NATIONAL PROGRAM DIRECTOR, UTILITY SERVICES,
THE CINCINNATI INSURANCE COMPANY
Does your work require the
use of contractors, general contractors,
consultants, engineers and traditional
subcontractors such as painters? Did you
know that every contractor you hire could
put your utility at risk of financial loss? It's
a scary truth. Thankfully, contracts and risk
transfer can help protect your utility.
For example, say you hire a general
contractor for a major project that extends
service lines to an outlying area of the
community. The general contractor hires
excavation, traffic control, landscaping
and paving subcontractors to perform
most of the work. You and the contractor
verbally agree that the contractor bears
responsibility for job-site safety. You don't
bother with contracts since the general
contractor is a lifelong friend. You played
football together, go to church together
and your kids are friends. You trust one
another and your handshake is your bond.
On the job, things go wrong from the
start. The excavator hits a gas line, causing
a major disruption to local businesses.
In this example, six businesses lose
$250,000 in combined income when they
have to shut down for gas line repairs. A
week later, a traffic-control worker zones
out and has his sign turned to "slow"
instead of "stop," leading directly to a
three-car accident with injuries. Three
damaged cars and four injuries total
$180,000. Worst of all, a curious child
wanders onto the job site one evening and
falls into an open ditch, suffering serious
injuries. Estimates for hospitalization,
medical care and long-term care over the
lifetime of a child who is now disabled
exceed $10 million. What about that verbal
agreement? These claimants expect
someone to pay for the damages.
Who is responsible for these mishaps?
Ideally, the excavation subcontractor
would be responsible for the gas line, the
traffic-control subcontractor would be
responsible for the auto accident, and the
general contractor would be responsible
for the child's injury. The larger question
is: who will be sued? The likely answer is
the subcontractor, the general contractor
and you. In the absence of a contract, it's
possible that much of the responsibility
will fall to your utility.
Scenarios like this occur almost
every day, which is why it is vital to use
contracts with every contractor you hire.