Precast Inc. - March/April 2008 - (Page 38)

BUSINESS & MANAGEMENT Risk Management Culture Consider your liabilities when contractors are on your property. By David Parkhurst I t seems the business of protecting your business gets tougher and tougher each year. Every time we pick up the newspaper and read about a jury awarding large sums of money in a lawsuit, it makes us wonder if there is anything we can do to protect ourselves. Although there is no protection against an uninformed jury, you can do a lot of things to manage risk. Risk is the possibility that something, usually negative, will occur. The management of this risk – or Risk Management – is the evaluation of these risks, taking steps to reduce the risk, assessing the possible negative impact of the risk, and determining how to avoid or minimize the financial impact. Precast concrete producers, like many other manufacturing companies, face the risk of financial damage from many different angles every day, including those from injuries, lawsuits or equipment loss. When we think of these risks, we usually think of our employees or our real property. However, this leaves out one very important risk: our subcontractors. Consider the construction crew building a new expansion, or the roofing crew, or the HVAC system installer or even the contractor who delivers your products. These are all people who pose serious risks to your business. When you consider contractors who should be on your “risk radar,” consider any company with which you do business. Listed below are some different ways to provide protection for your company. of the tools that help to achieve this are written contracts (when at all possible); indemnification agreements; hold harmless agreements; and additional insured requirements. Written versus Oral Contract. Having a written rather than an oral contract is the first area of defense. This does not mean the days of “a deal on a handshake” are gone. But if you can shake on it, why not put it in writing? Oral contracts are still valid in most states; however, they are very hard to prove. They also usually focus on things like scope of work and price and leave out risk transfer. Indemnification Agreements. Indemnification agreements transfer the risk to other parties. There are several types: • Broad Form Agreement. These agreements transfer all risk of loss described in the contract to other parties. If something happens in the scope of the contract, you are not at fault. • Intermediate Form Agreement. These agreements transfer all risk of loss described in the contract to other parties except when the loss is entirely your fault. If something happens and another party has just a little bit to do with it, the other party – not you – is responsible for all damages. • Limited Form Agreement. These agreements transfer only the amount of risk that the other parties share in any loss described in the contract. In other words, if you are 60 percent at fault and the other parties are 40 percent at fault, then you are responsible for 60 percent of the loss. When you are drafting indemnification agreements, consult your attorney. Most states have anti-indemnification statutes that limit what these can do, and an invalid agreement is worthless! Hold Harmless Agreements. Hold harmless agreements are different from indemnification agreements. In a hold harmless agreement, the party assuming the risk agrees not to attempt to recover payment from you for damages that it incurs. Additional Insured Endorsement. An insurance policy is a contract between your business and an insurance company. When an insurance company issues a liability policy, it agrees to pay those sums that you are legally obligated to pay according to the coverage in your policy. If a claim occurs, the insurance company will defend all insureds and will pay the amount of any settlement or judgment up to the policy limits. When you hire a contractor, ask to be added to the contractor’s insurance company as an additional insured onto its liability policy. By doing this, you are protected under the contractor’s policy against liability that arises as a result of work it is doing for you. When looking at the additional insured endorsement, there are a few other things to consider: • Whose policy pays first? If you request coverage as an additional insured on a primary basis, that means the policy will pay first and Risk transfer Risk transfer is the shifting of risk among the parties of a contract. Some 38 MARCH/APRIL 2008 | PRECAST INC.

Table of Contents Feed for the Digital Edition of Precast Inc. - March/April 2008

Precast Inc. - March/April 2008 Contents Technically Speaking Concrete Repairs Return-to-Work Programs Marketing in a New World Building Confidence Risk Management Culture Bloquea La Energia – Es Tu Vida! Lock It Out – It’s Your Life! Fiber Optics in Countertops MCPX Wrap-Up Product Profile People & Products Advertisers Index NPCA Calendar

Precast Inc. - March/April 2008

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