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What
You Don’t Know CAN Hurt You!
As a business owner or manager, how well
do you know your contractors or subcontractors? What is their
safety record? Do they carry adequate insurance? Do they pay
more for their insurance than other companies in their field
do?
Their problem, right? Think Again.
"Licensed, Bonded and Insured"
the ad reads. As an astute manager concerned about your exposure
to lawsuits and other losses, you say to yourself, "They’re
the ones to hire for our service contract." Good
Move! In fact, now that you think about it, you always
hire licensed contractors when the work requires it.
And insurance? What’s the big deal? Hiring
an insured contractor is a no-brainer. Anything else would
be business suicide in this day and age of litigation.
You say you even require a certificate
of insurance from the contractor’s insurance carrier or broker?
Excellent! You’ve done the right things so far, but if that’s
where you stop you could be blindly taking on liabilities
and headaches you don’t need.
In addition to the other indicators you may
look for, such as price, reputation, payment history and such,
you need to investigate their safety record and safety program.
This is critical! You or your business can be held liable
in many situations for the hazards that your contractor(s)
create. More and more the courts are disallowing hold harmless
agreements or other contract verbiage as the sole means of
protecting yourself from the unsafe activities of your subordinate
contractor. They are viewing it as a convenient means to duck
responsibility for maintaining a safe work environment. Every
time you hire a contractor (or sub-contractor) you must invest
the time and effort to select the best contractor for the
job.
Here are a few things to look for:
Safety Program
- Do they have a program in writing?
- How involved is their management in the safety process?
- Do they inspect their job sites for safety compliance?
How often?
- Do they hold their employees and supervisors accountable
for safety?
- How are they notified of accidents and injuries on the
job?
- Do they have accident review committees? How do they correct
situations or practices to avoid a similar situation in
the future?
- How are their employees and supervisors trained?
- Do they have a safety orientation for new employees?
- How often do they have safety meetings? Do they perform
short, frequent safety training sessions (known as tailgate
or toolbox meetings)?
- Do they perform corrective training for employees who
violate safety practices? Are they disciplined?
Safety Record
- Has OSHA cited them during the last 3 years? Any repeat
violations that would indicate a disregard for OSHA standards
rather than ignorance?
- What is their Experience Modification Rate (also known
as Ex Mod or EMR)? This is a decent indicator of the contractor’s
past Worker’s Compensation record. A little explanation
may be necessary here. Insurance companies use the Ex Mod
to compare companies in the same work classification and
adjust their rates accordingly. It is a reflection of their
Worker’s Compensation loss history for the last three full
years.
If a company’s Ex Mod is near a 1.0, it
means that they have an average loss history as compared
with similar companies. A higher number, such as 1.4, means
they have more injuries than similar contractors (40% more
in this case). If you can get a contractor with an Experience
Modification of 1.0 or less, there is a good chance you
will be dealing with a company that has a safety record
better than that of their peers.
Proof of Insurance
- Don’t forget to obtain a current certificate of insurance
from your subcontractor. Don’t accept a "copy of a
copy". Request that their agent or broker send you
the certificate. For contractors that have worked for you
before and provided a certificate, which has since expired;
don’t assume that they still have insurance. Obtain an updated
certificate.
Finally, after you’ve determined that this
contractor isn’t likely to put you and your company at risk,
ensure that it doesn’t. Once you’ve hired the contractor,
inspect it. Spot check to ensure that their employees and
supervisors follow your safety guidelines (which you’ve communicated
to them). Make sure that the work area is free from hazards
to the public or your employees (you can be liable). Take
notice if their employees are not wearing the proper protective
clothing. If you feel uncomfortable with their safety practices,
communicate that to their management. Either they will correct
the situation or you need to shop elsewhere.
We’ve really only covered the basics, but
it’s a good place to start. Also, this won’t guarantee that
you won’t get stung by a reckless contractor, but it will
certainly decrease your exposure. For more information contact
your insurance carrier. They should be very interested in
helping you reduce your losses, or exposure to losses.
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