- Bryan Williams
CONTRACTS - Are you Paying too much $$ to fulfill Insurance Requirements?
If company has ever been contracted for a job, odds are that you signed a contract. Also, you most likely signed away some rights, possibly purchased additional insurance to fulfill their requirements & were required to list that organization on your insurance policy as an Additional Insured. These are all fairly standard practices of contractual agreements & nothing to be too concerned about as long as you have the right insurance professional in your corner.
This article will discuss those boilerplate Contractual Agreements that require EVERY INSURANCE COVERAGE KNOWN TO MAN - regardless of the size of the job & what work you're actually doing. While some of these are very difficult to get around (ie jobs with municipalities, colleges/ universities & large corporate entities - think Google/ Alphabet), most
contractual insurance requirements can be negotiated. This requires working with an Insurance Professional with a deep understanding of contractual language, insurance requirements & the type of work that you're performing. An example of this is below.
EXAMPLE: You're an owner/ operator plumber & are hired by a Homeowners Association to replace some sink faucets, bathroom plumbing & pipes in the HOA Clubhouse. This is a fairly small $2,500 job. However, that same HOA is requesting an Insurance Certificate with General Liability, Workers Compensation, Commercial Auto w/ Hired & Non-Owned Auto, a $5 Mil Umbrella Policy & Professional Liability Coverage - along with listing them as Additional Insured with Primary/ Non-Contributory Wording.
OPTION A (WHAT MOST BROKERS DO): You reach out to your Insurance Agent & ask for that Certificate. Your Insurance Agent advises you that you only have General Liability and Commercial Auto Coverage in place currently & the cost to add on the Additional $5 mil Umbrella limits, professional liability & workers comp (to include an owner as the only employee for a WC Policy is not cheap) is over $7,000 in Additional Costs. You BALK at the additional cost & decline the job w/ the HOA since it's simply not worth it!
RESULT: You lost the job & will most likely will not get any more job opportunities with that HOA again. Losing out on potential future jobs worth a lot more (ie replacing the entire plumbing system in all of the units in a couple of years).
OPTION B (THE SOLUTION): When you reached out to your insurance agent you were asked for a copy of that contract & Insurance requirements. Your agent advised you to connect him w/ the HOA's Risk Management contact (the person requesting this certificate). After your agent calls & emails the Risk Management contact a few times, you get copied on an email from the agent w/ the Certificate of Insurance listing the HOA as Additional Insured.
RESULT: The total additional cost to you was $0 & the client is very happy with your work. The Workers Comp requirement was waived since you have no employees, the Professional Liability requirement was waived due to the type of work you are performing for them & the Umbrella requirement was waived as a courtesy due to the prohibitive cost of that requirement & the small job being performed.
Most Contracts are able to be negotiated. Oftentimes, companies are very happy to work with subcontractors, consultants, tenants, etc. to discuss the verbiage in their contracts & their insurance requirements. This includes the limits and types of coverages. This also shows the client that their sub/tenant/consultant is organized & has a mind for risk management - which goes a long way towards a healthy & profitable relationship!
Unfortunately, many Insurance Agents & Brokers are simply looking for that extra commission payment & try to force their clients into the extra coverages. Find an Insurance Professional that wants the best for your business & has the knowledge to back it up.