Guide to Hiring a Contractor

Each year the “landscape” for the communications industry becomes more complicated. Contractual requirements, litigation and the potential for extended liability are challenges we face with more regularity, making risk management a necessity. This guide serves as a starting point enabling you to understand the process necessary to transfer risk and reduce your operating exposures to contractors that you may hire.

If the contractor you hire is not insured or inadequately insured, you could end up being responsible for any injuries or damages to property that your contractor may have caused while working for you. Plant expansion or modification, erection of a tower site, installation of major equipment or even remodeling your administrative offices all qualify for this process. Unitel Insurance Group urges you to use this guide to help protect your company from unnecessary risks.

Your overall risk management strategy should include contractually transferring as much risk as possible to your contractors and any subs (if applicable). A written contract that includes the scope of work and performance standards, time line for completion, payment terms, indemnification and hold harmless language in your favor and insurance requirements is essential. A written contract is the best way to document risk transfer terms and agreements.

Risk Transfer Checklist:

• Insist on a written contract with indemnification and hold harmless language in your favor (your attorney or Unitel can help you with this)
• Include a requirement in the contract that you be added as “additional insured” on the contractor’s commercial general liability policy and that your status be on a primary basis
• Require that the additional insured coverage include both work in progress (i.e. on-going operations) and completed work (i.e. completed operations) and that a specific length of time for the coverage be established
• Be sure that your contract calls for the contractor to maintain adequate commercial general liability, auto liability and worker’s comp limits of insurance and that you get a minimum of a 30 day notice if the contractor’s policy is cancelled (your Unitel agent can help you with this)
• Obtain certificates of insurance (COI) that describe the type and limits of liability, worker’s comp and auto liability insurance in effect for the contractor (and any sub-contractors) and names you as the certificate holder as well as an “additional insured”
• Maintain organized files that include your contracts, certificates of insurance and additional insured endorsements. A suspense system (manual or automated) is necessary to track the certificates’ policy expiration dates. When a policy expires, contact your contractor and request a new certificate.
• Liability exposures are present both during the actual project and for a considerable time after the project is completed. Exposures to bodily injury are present while the project is underway and construction quality issues may arise after the project is complete. Reducing the potential for liability losses, whether insured or not, is achieved by controlling the work site as well as the quality of construction. (safety, security) This effort will also increase efficiency, promote public relations and protect your reputation. Note that the initiator of the contract often retains overall responsibility for security at a job site despite the contractual transfer of risk to the contractor.
• The process of risk transfer may include input from attorneys, insurance professionals and other industry resources to address the needs of your communications business. Consultation with your attorney and Unitel Insurance Group is your best tool for implementing a viable risk management program.