Construction projects can be basic, short term tasks or complex, multi-year endeavors involving millions of dollars. In significant projects, many outside contractors (and subcontractors) are frequently hired, even if the overall project is awarded to a big well-recognized engineering or construction firm. Unless the project is insured in a Wrap Up program (all contractors, subs and subs of subs are insured under 1 contract for 1 job), then management cannot presume that all of their contractors are insured continuously via the period of the project.
Numerous Construction Projects Involve Numerous Tiers of Subcontractors
In a main project involving numerous aspects such as roadwork, foundations, electrical, plumbing or roofing, the general contractor awarded the overall contract frequently hires a variety of local contractors, assigning them little portions of the job. These subcontractors may even hire a second or third tier of subcontractors to perform specialty work not within their area of expertise. Subcontractors typically work on important aspects of the project. If an injury, death or serious industrial accident involving hazardous materials occurs, dealing with the consequences can be daunting, even for a well capitalized firm. Recently a settlement for 8 million was reached by contractors in the Boston ‘Big Dig’ construction project due to the death of a motorist from a tunnel ceiling collapse. Insurance claims are the responsibility of the contractor and subcontractor. Nonetheless, if their policy has lapsed or carries insufficient limits, the company could be held liable- often for tens or hundreds of millions of dollars.
Despite Contractual Risk Transfers the Business May possibly Be Responsible for Uninsured Claims
Ultimately, the company is responsible for any person who enters their premises or performs any activities on their behalf, leaving them basically 3 choices on how to handle that risk:
* Avoid the risk – don’t do the activity or let anybody on their premises (usually not an choice)
* Assume the risk or component of the risk – huge deductibles and Loss Sensitive insurance programs are examples
* Transfer the risk – often done by contract and/or insurance.
Even if the business has transferred the risk via contract to somebody else, such as a vendor or a contractor, they will need to be sure the vendor/contractor has the financial resources to finance that risk, which frequently is by insurance.
Need Proof of Insurance – Certificate of Insurance Form
Most organizations call for proof of insurance prior to beginning a project in the form of an Insurance Certificate. Sadly, several firms stop there and fail to monitor the ongoing coverage status. This can result in policies expiring and not being renewed, changes in limits, or other problems later on. Tracking those insurance certificates is a basic Risk Management activity and one that every organization should do. With out this function, the firm or it’s own insurance carrier assumes their vendor or contractor’s risk (even if they have signed contracts transferring the liability). Manually checking to see that each contractor is insured may possibly be overwhelming, even so, businesses which specialize in this service can make the procedure less difficult.
Implement an Efficient Certificate Tracking System
Tracking the insurance certificates can be performed by a service or managed internally making use of software. Although outsourcing hands off the every day responsibility, the answer means on-going monthly fees and could limit your control on what requirements you can track and how you interact with your vendors/contractors on problems. Software packages give you:
1) a lot more flexibility,
2) greater control of your data and
3) are generally much less high-priced on an ongoing basis. Regardless of which alternative you select, the minimum requirements of an efficient certificate tracking system would consist of the following features:
* User defined Insurance Requirement Categories- employed to set vendor certificate policy, limit and extra terms requirements.
* Compliance verified- for no certificate, missing policies, insufficient limits, missing additional terms, soon to expire and expired policy dates. Capacity to override individual policy, limit or extra term requirements.
* Follow-up letters automatically generated- containing detailed list of non-compliance issues. Letter template can be customized. Reminder letters sent automatically.
* User defined fields to organize/identify vendors- for filtering/sorting screens and reports.
* Attachments for electronic archival- of actual certificates.
* Comprehensive insurance certificate tracking reports- detailing non-compliance problems by vendor.
* Password access- with numerous levels of user rights.
* Audit Trail- produced for certificate maintenance history.
Accidents Take place Despite the Very best Safety Programs
Unfortunately accidents do happen! 1 of the methods to protect your company from unnecessary costs is to make certain your contractors have valid insurance that meets your requirements. Don’t wait until that very first multi-million dollar claim to discover your contractor’s insurance lapsed and you are now liable for their employee’s injuries or negligence. Implement an effective insurance certificate tracking system as part of a comprehensive risk management program.