Knowledge Corner

Did you know the construction contract you signed contained a clause that transferred any risk from the project owner or general contractor to your company? Such clauses are common in executed contracts. Their purpose is to transfer any risks on a construction project from one party (transferor) to another (transferee) in order to eliminate the transferor’s exposure to risk. This legal practice is known as contractual risk transfer. 

Such clauses have real consequences for your risk management program. As a trade contractor, it might not be possible for you to change these clauses in a contract you get from an owner of general contractor. However, there are some things you can do to protect your company from risk.

1. Review the indemnification/hold harmless agreement to understand the range of liability you are taking on. If you are required to indemnify higher tiers, try to negotiate revisions.
   
   
2. Increase your knowledge of applicable state statutes and case law regarding indemnification/hold harmless agreements for lower-tier trade contractors.
   
   
3. If a contract requires you to provide additional insured protection for higher tiers, limit the scope of coverage if possible.

Contract review is very important. If you are unsure of language, it would be beneficial to have it reviewed by a licensed insurance agent who is a risk management professional. You may not be able to negotiate new terms, but at least you will be aware of all the risks you are facing by signing the contract. 

Download our latest ebook to learn more about contractual risk transfer and how clauses within your construction contract can affect your business's bottom line. If you have any additional questions, you may give TSIB a call today at (201) 267 7500! 

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