In addressing contractual risk transfer when hiring sub-contractors to work on your behalf in New York State, there are some key components to be aware of. We will work through those key points here.
While working through your individual contracts, several areas of the agreements should be evaluated, including but not limited to:
- Parties to the agreement
- Scope of work being provided (including a detailed description) when hiring a sub-contractor
- Hold harmless, defense and indemnification requirements within the agreement
- Insurance requirements of the agreement
- For construction situations: a safety statement/requirement of the sub-contractor within the agreement
The hold harmless/indemnification requirements of the agreements also need to be reviewed to determine if they appear to be worded properly for the state where the work/service is going to be preformed. This is even more important in New York State, where NY Labor Laws impact construction projects. NY Labor Laws 240 and 241 impose duties on the “Property Owner” for safety issues on their jobsite that they do not control on a day-to-day basis. This is something that should be reviewed by your risk management and legal experts.
Insurance Requirements are another critical item and our focal point at OneGroup. We’ve found in many cases that both attorneys and architects are not comfortable detailing insurance requirements in agreements. Many may use wording that was used 10 to 20 years ago. Some also use wording from standard AIA contracts for insurance that can be vague, lack detail and is sometimes confusing. Paying close attention to the proper and applicable coverage form numbers is critical.
Reviewing these insurance requirements to make sure they are comprehensive and that they best protect the organization implementing the contract is very important. Internally, we make sure details like limits and key coverage areas are spelled out by line of business so that the coverage is triggered to protect the proper party. In some cases, the actual policy conditions or endorsements will only provide coverage if it requested in a written agreement executed prior to a loss.
Additional insured status for the proper party is an example of this. It needs to be requested on a “primary and non-contributing” basis because many carriers have wording on their policies stating that coverage for the additional insured will be on an “excess” basis, unless a written agreement executed prior to the loss requires that the coverage be on a primary or non-contributing basis. (“Excess” – meaning the party implementing the contract as the additional insured would have to exhaust their own policy limits before their sub-contractor’s/vendor’s policy would come into play)
Most situations will require:
- Workers’ compensation and employers’ liability
- Disability benefits (DBL)
- General liability
- Automobile liability
- Umbrella liability (limits of liability in line with the hazard level of the service being provided)
List of “optional” special insurance policies that may be needed based on the scope of work and services being provided:
- Professional liability (engineering or architectural services typically)
- Cyber liability (IT services)
- Pollution/Environmental liability
- Riggers’ liability
- Builders’ risk or installation floater – property coverage where something is being built or installed for the property owner.
- Owners’ and Contractors’ Protective policy (OCP policy) based on the type of construction project and exposure presented to the property owner as the owner for the project being undertaken.