Business Solutions

Why Insurance v/s a Bond?
A bond protects the public, suppliers and taxes liens. If you breach a contract, fail to perform services which you have been paid for, and/or fail to pay an account which services were obtained, the bond could be liened. When the bond company pays out damages, this value must be paid back to the bonding company. Hiring an attorney to defend the suit could cost you over $4,000.00 in costs to you and still need to replay the bonding company.

An insurance policy has a limit of coverage which will be available for defense and damages. You pay a little and the insurance company pays up to the limit of coverage. This limit is typically $1,000,000 for an occurrence. The damages paid out by the company will not be required to be paid back. You may have a deductible required per the policy conditions and that’s it.

Back to top

What’s up with Insurance Costs?
This is the biggest question today market place from Homeowners, Contractors, and the Professional Industry. How could two buildings that were insured cause this type of financial damage to the insurance market?

Like any product it starts with the company offering materials to a manufacture. The reinsurance company’s have a large investment fund available for insurance company’s to purchase from. The reinsurance company will dictate the type of liability risks unable to obtain their reinsurance and what price their reinsurance will cost the insurance company. The insurance company in turn must make a profit and decides what type of business they are willing to offer coverage to and at what price. The terms and pricing is offered to wholesale agents and/or retail agent which is then sold to the public.

With the twin towers, the damage did not stop with just the buildings going down. The damage to the building, the buildings around the towers, damage for injury, damage to each business which leased from the towers, investigation costs, clean up costs and so more. This cost was transferred to the insurance company and the reinsurance companies. This amount of devastation could not have been predicted. The stock market was having issues prior to 9-11 and continued to be felt by all insurance stocks.

In order for any company to stay in business, the cost of their products will be adjusted to ensure a profit and the stockholders are happy. Selecting a specific product or client which is likely to ensure profit will strengthen the performance of a business. Liability, Professional and Umbrella policies have had their product cost increased to ensure limits are available to pay a claim and keep the stockholders happy.

Back to top

Hiring a Sub-Contractor?
Hiring a sub-contractor is common as it keeps the bottom line expense down. A temporary increase in business or a short term job may require additional personnel. Keeping in mind, the sub-contractor is still an extension of the business and will reflect on the company’s performance. A client is not aware a sub-contractor was hired just that the work is being done. Hence the law suit in your company name for damages the sub-contractor may have caused.

1) Know the background and work ethics of the sub-contractor.

2) Have a contract with a hold harmless in place with between your company and the sub-contractor.

3) Obtain verification of insurance from the sub-contractor naming your business as an additional insured.

4) Know what exclusions are in the sub-contractors policy before they perform work. If a type of operation is excluded, there may be no coverage on your company’s behalf.

5) Review and inspect the work completed by the sub-contractor.

6) Use the same sub-contractor(s) and build the relationship with them. Using different sub-contractors can open up an issue with quality of work performed.

7) Prior claims which could decrease the limit of coverage shown on the certificate of coverage.

8) Liens or open law suits which could affect the performance of the sub-contractors work and/or decrease the policy coverage limit.

9) Is the sub-contractor using their auto for business? You need to ensure verification of their auto limits are shown on the certificate of insurance. These limits should be no less than $300,000 to ensure your company is protected. Most professionals will advise these limits should equal the occurrence limit for the liability.

Back to top

Interview your Clients?
This may seem to be an obvious solution but it is not practiced enough. Your client could reflect on your business and financial strength of your company.

1) Does your client have the financial means to pay for the contract and/or work to be performed?

2) Does your client have ownership or authorization in the business to order the work and/or sign a contract.?

3) Liens or open law suits which could affect your payment or possible position in the law suit. Hold harmless in your company’s favor to help avoid becoming part of their law suit.

4) Know the integrity and ethics of your client. If you are asked to cut corners and go against your professional judgment, your company could become a part of your client’s future problems.

5) Don’t take the job because money is tight and your gut tells you differently. Approach each client as if you are financially sound to determine if the client meets or exceeds your standards. This client could cause your financials to become worse instead of bettering your financial position.

Back to top

Why use a Contract?
This is an area which hesitation is found. Some feel using a contract will be an intrusion, inconvenience or cause them not obtain the account. A contract is simple; “an agreement or understanding between two or more entities to perform services.” It is also required in most insurance policies and not being in place could decreased limits of coverage or have a high premium penalty in place.

A contract may not hold up in court or stop a law suit, but the steps were taken to be pro-active. In working with other professionals (Attorney’s, Insurance Company’s etc), you will find a contract is always involved. Your business should have the same standards.

It is always recommended an attorney should review a contract given to you before signing.

1. Scope of work to be performed.
2. Payment for the work to be performed.
3. Don’t guarantee what you cannot uphold. Unable to obtain surveillance footage for what the client is paying for, unable to perform work on a time or at a scheduled time. Nothing is black and white as options vary between people.
4. Hold harmless in your favor for the issues outside your control. If you did your work properly, why are you left holding the bag for someone else’s problems?
5. Avoid the he said she said. Document, document and document.
6. State additional personnel may be hired to ensure the work can be performed.

Other items to keep in mind

1. Have a disclosure on your reports. It might be a hold harmless for the evidence found or not found.
2. Ensure the person signing the report has legal and company authorization to sign the report.
3. Ensure items which may be held are secured as most policy will exclude Care, Custody and Control.

Back to top

Keeping records and back up your business?
Taking the time to ensure your records are complete is imperative. When it is fresh in your mind, write it down and complete the task in hand. Going back 6 months or 2 years later to recall what took place will be altered and possibly not help up on court. Keep your records as long as you can, some say 6 to 10 years is the minimum you keep your records. With technology today, why would you need to be discarding them at all? Your computer in today’s world is one of your strongest assets. Scanning records, keeping journals, and knowing your financial position will be a big tool when the information is needed. Ensure you back up t

Back to top

Controlling your Claim! ~ In lieu of a claim
If your business is pro-active this is the first step in controlling claims. Never assume and always look to further your education. Keep up with current laws, regulations, contracts, changes, and activities in your field. Take refresher courses on older classes taken.

Don’t cut corners Having a friend of a friend help out and obtain information or perform work on your behalf due to time, can hurt you legally and financially.

Working in other States? Can you? Before you agree to take on a project in another state, ensure their laws are complied with and understand. Not knowing these laws could cause a claim.

If you feel a potential claim may occur due to words in passing or direct comments. Contact your agent and review the issues with them. In controlling the chance of a law suit before the service of suit arrives, can keep the insurance expenses down along with the company’s record of “no losses” in tack.

Always know or have an attorney on retainer. This is the best legal defense for your company.

Back to top

Last revised: Date 10/1/2003