- Talley’s Insurance Tip of the Month
- January 11, 2016 | Author: Talley H-S Kovacs
- Law Firm: Pessin Katz Law, P.A. - Towson Office
- Does your business provide a service and operate pursuant to contracts with vendors or sub-contractors?
Talley’s tip: If so, take a second or third look at your contracts to make sure that you are getting the appropriate level of indemnity from your business partners for liability that might arise out of your joint endeavors.
For example, imagine a company that delivers mattresses for a national retailer and who sub-contracts with trucking companies to physically retrieve the mattress from a warehouse and deliver to a consumer at their home. You and your employees might play no part in the physical delivery of the mattress, or even the installation of the mattress, but be assured, you will be in the chain of named defendants in a lawsuit should something go awry. In the event that the delivery company causes damage to the house on the way in or out or someone is injured because the installation was not done properly, your company- as the middle man- might not be ultimately liable, but you will be part of the claim, if not the lawsuit.
So, what should you do?
First, look at your contracts. There should be a discrete provision called “Indemnity.” That clause should state explicitly, in plain language if possible, that your company is not liable for the acts or omissions of the other party to the contract. Both sides of the contract should be defined broadly to include employees, agents, officers, members, etc. You want to cut off the possibility that someone else’s negligence while executing work for you or on your company’s behalf does not come back the chain and stick to you.
Second, look at your contracts. There should be a discrete provision called “Insurance.” That clause should, again explicitly and in plain language, state that the vendor or sub-contractor working with you has commercially acceptable levels of insurance and that your company is explicitly named as an “Additional Insured” on their policies where appropriate. There are a couple of ways to go about this, and a lawyer can help.
Third, look at your contracts. If the words “Indemnity” and “Additional Insured” do not make an appearance, it’s time to revisit your exposure to risks in your business and determine whether you could be doing more to protect your company.