Subcontractors can be a real asset to most management companies and contractor/developer/builders. The assets they bring to the table are many – they allow you to manage multiple projects at the same time; they can save you money by bringing specialists to the worksite only when needed and not on the payroll when their specific specialties aren’t required; and they don’t use up your financial resources – various employee benefits such as health insurance, vacations, 401Ks, etc. In most cases, subcontractors are a real benefit.
But, sometimes, they can spell disaster!
Here’s how: hold harmless agreements and certificates of insurance normally supplied by subcontractors to protect the developer/contractor/builder or project management company often aren’t worth the paper they are written on. They are often poorly worded and won’t stand up to a court proceeding or lawsuit; they may be expired and out of force; they may be presented when the job is awarded and may look like they are “in force” and then no payments are made on the coverage so they are null and void well before the sub work is completed, and more…and this all spells potential disaster.
While most companies do perform a cursory review of certificates or hold harmless agreements, often they use someone already on their payroll who may or may not have the appropriate experience or time to review the documents with a fine tooth comb to prevent future problems.
Many companies have begun to hire specialized insurance consultants for this important review work and likely can avoid potential problems and save aggravation, lost time and lost money.
If you should decide to take the chance and review your own certificates and hold harmless agreements internally, here’s a helpful list of potential dangers:
* Erasures or hand written documents
* Coverage is valid on the certificate issue date
* Date of document is older than 30 days
* Insurance company rating is poor
* Certificate is expired
* Wording in description block is inadequate
* Signature is missing
* Certificate is cancelled after issued and no notice given
In addition to these, there are numerous other problems and issues that an experienced insurance consultant can discover that can save you thousands of dollars and hundreds of hours of time. Doing due diligence ahead of time can make all the difference in the success and cost effectiveness of your next project.
David Sullivan is a Principal at Risk Managers LLC, Norwood, MA