Two Things Contractors MUST Know Before Signing An Agreement.

February 17, 2017

 

By: Jameson P. McShea

According to the Occupational Safety and Health Administration (OSHA), "Out of 4,379 worker fatalities in private industry in calendar year 2015, 937 or 21.4% were in construction — that is, one in five worker deaths were in construction." Not only is this devastating to families and friends who lose loved ones, but unprotected firms of any size can be liquidated. 

Industrial worker cutting and welding metal with many sharp sparks.jpeg

The following were the top 10 most frequently cited standards by Federal OSHA in fiscal year 2016 (October 1, 2015, through September 30, 2016):

  1. Fall protection, construction
  2. Hazard communication standard, general industry
  3. Scaffolding, general requirements, construction
  4. Respiratory protection, general industry
  5. Control of hazardous energy (lockout/tagout), general industry
  6. Powered industrial trucks, general industry
  7. Ladders, construction
  8. Machinery and Machine Guarding, general requirements
  9. Electrical, wiring methods, components and equipment, general industry
  10. Electrical systems design, general requirements, general industry 

 

With this is mind, lets talk about the contractor agreement you signed to do work for that GC this year. There are two clauses of the contracts that have a huge impact on where liability falls in the event of an accident or claim. One may be more familiar than the other.

1. The Hold Harmless-

This agreement is put into contract when one party wants to remain legally not liable for any claim arising from a third party against the other party in the agreement. Lets give an example. ABC General Contracting hired DEF framing to do frame work on site. ABC has DEF sign an agreement with a hold harmless clause installed. A walk through of the site happens during construction with some potential buyers and an individual trips and falls on some frame work left out.  The buyer sues DEF. DEF tries to claim ABC was liable, but unless ABC is grossly negligent or intentionally fails to perform according to the terms of the  agreement, they are legally "Held Harmless" and not liable.

2. The Waiver of Subrogation

Subrogation is the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties. So, If Jack falls off a improperly secured scaffold and files a workers compensation claim, the insurer will pay the claim and then "subrogate" or transfer that payment the duty to pay that claim to the insurer of the company that put up the scaffolding. BUT, lets say the contractor that hired Jacks company had a waiver of subrogation in place when they were added to the additional insured list of Jacks policy. Jacks insurer assumes the risk and waives any subrogation right it had. 

IF you have a claim and the insurer has waived its subrogation right due to contract- be aware of your premium costs the following year. There is a good chance it will go up. 

These two clauses are great examples of why it is important to understand the contracts you agree to.

 

Tags: insurance, Liability, Risk Managment, Business Insurance, contractors, construction insurance, construction agreement, legal contract, hold harmless, waiver of subrogation