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The Importance of Risk Transfer With Your Subcontractors

By: Chris Larmore The nature of contracting is risky, with many parties on a jobsite working together to complete a quality work product. But what about when one of the subcontractors work is faulty? Often general contractors and subcontractors who hire subcontractors get pulled in on liability and “action over” workers compensation claims even if they aren’t at fault or it was primarily the single subcontractors’ work who caused the claim. That is why “risk transfer” is so important in contracting. The way contractors transfer risk is by making sure they have high quality subcontracts including indemnity agreements from EVERY subcontractor they hire. To back up that subcontract’s indemnity, the subcontract will also require specific insurance provisions with the most important being a Waiver of Subrogation and an additional insured. These items along with some other important provisions allow the contractor to utilize the subcontractors insurance to defend themselves against claims they may have been included in but not caused. This month only, contact chris@redcedaragency.com and even if you aren’t a current client, we will provide you a sample certificate template that you can train your office staff to use to confirm you are getting the right things from your subcontractor. We also have some standard short form subcontracts available. Nobody wants their insurance prices to go up because someone else’s work caused a claim. Make sure you transfer your risk carefully.

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