Sorry, I Don’t Shake
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Insurance is purchased for a variety of reasons - statutory requirements, protection against large/unpredictable losses, loan requirements, etc... Premiums are partially driven by containing losses through risk management efforts such as safety and loss control programs. But what happens when a vendor outside of your manufacturing or recycling company, be it janitorial, maintenance, electrical or trucking, comes onto your premises to do work and their employees get hurt or they damage your facility? If a proper formalized risk transfer program isn’t part of your overall risk management program, these claims could potentially end up on your loss runs, adversely affecting your premiums.
One way to transfer risk away from your company and your insurance policies is by making sure you have a proper contract in place with each of your vendors, contractors and suppliers. (Sorry, a handshake doesn’t count.) Each attorney-reviewed contract should include a section that specifically outlines the appropriate insurance coverages that third parties must carry in order to do business with your company. This includes Workers’ Compensation, general liability, auto liability and umbrella/excess liability insurance. Other insurance policies that might be appropriate, depending on the type of vendor, contractor or supplier, could be third party crime coverage, third party employment practices liability insurance, professional liability, pollution liability, product recall or even cyber liability.
Additionally, it’s recommended that third parties be required to include your company as an additional insured on a primary and non-contributory basis on their policies, excluding Workers’ Compensation and Professional Liability. Their Workers’ Compensation, General Liability and Auto (as appropriate) policies should also include a waiver of subrogation in favor of your company. Because of the wide variety of services and products that might be provided to your company, it’s important to discuss with your insurance agent which types of insurance and what limits are appropriate for your different classes of vendors, contractors and suppliers.
Once you have your contracts in place, inclusive of the appropriate insurance requirements, the final step is to have each vendor, contractor or supplier provide you with evidence of in force insurance coverage that’s compliant with their contract requirements. It’s in this step where having a contract in place is important. For example, a vendor may provide you with a certificate of insurance that states your company is an additional insured on the general liability, “as required by a written contract.” If there’s no contract requiring that you be an additional insured, then you’re not an additional insured.
It’s understandable that the idea of keeping track of all of these contracts and their corresponding certificates of insurance might seem somewhat daunting, but know that your Assurance agent can assist and offer additional services in this area. We’re here to minimize the risk and maximize the health of your organization by transferring risk away from your company.
Contact us today, or check out the related resources below for more information on how you can protect your organization.
- Certificate Tracking 101 – Free Assurance University Replay!
- Arm Yourself with 3 Tips for Best Practices in Risk Transfer – Blog Post
- Part 2: Three Steps to Creating and Maintaining a Risk Transfer Program – Blog Post
- Property Owners & Managers - Control What You Can to Lower insurance Costs – Blog Post
- 13 Questions to Ask Your Manufacturing Staffing Company – Blog Post
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