A strategic extension of many snow fighting teams, subs educated about risk can reduce your winter liability.
- If subs play a vital role in your operation, then they must be properly insured and adequately trained for their winter duties.
- Subs represent your snow removal firm, so they must be aligned with industry standards and understand client expectations.
- Insurance requirements will generally contain language that requires the sub to provide you with at least 30 days prior written notice before cancellation of coverage.
- Maintain an organized subcontractor management system that tracks dates of insurance renewals along with a checklist for the premium audit.
In response to the ever-growing risk-management need in the professional snow and ice management industry, the discussion has begun to focus on subcontractors and the vital role they play in a snow fighter’s overall operational strategy.
A properly insured and trained sub becomes a tremendous asset to contractors and clients alike, most notably in the event of a large storm or multiple back-to-back storms, like the ones that occurred along the East Coast prior to last winter’s disappointment.
Look at the leaders in the snow industry and you’ll see the top organizations use subcontractors who can be depended on when needed to assist the company winter snow and ice management operations.
The industry standards finalized by the Accredited Snow Contractors Association (ASCA) emphasize proper training and using experienced subcontractors who can live up to the expectations you establish with your clients. Complying with the client’s contract and having your standards in place is the goal carried out by your subcontractor.
Snow contractors must enforce a policy of using formal, written contracts that set forth the rights and responsibilities of the subcontractor relationship. Snow contractors must use written sub contracts knowing that many insurance policies could be limited to cover an agreement that is as-written. The contract should be signed by all parties before any work is started.
A proper subcontractor agreement should contain an effective and enforceable indemnification with a defense and hold-harmless provision that favors the top-tier contractor. If you are required by contract to hold your customer harmless, then the subcontractor hold-harmless provision should be in favor of you and your property-owner clients/property manager.
“Hold harmless and indemnification language is something that can play a huge impact once a slip-and-fall lawsuit is initiated,” says Joshua G. Ferguson, an attorney at Kent & McBride, P.C., in Philadelphia. “Further, it is one filled with legal terms and nuances whose impacts are too often noticed only once lawsuits arise. The most important thing for the indemnity – one who is owed the obligation from another – is to make sure that burden is properly shifted to the subcontractor performing the work.”
A snow and ice management contractor who uses a subcontractor should verify a proper insurance policy which would pay for the damages covered under the subs policy. This will transfer some risk for the protection of their company and the client’s interest.
The following types of insurance should be requested on a certificate of insurance:
- General liability
- Commercial automobile
- Worker’s compensation
Snow fighter Steven Jomides shares some of his key practices that help manage risk relating to subcontractors in his snow and ice management operations. Lawns by Yorkshire operates a snow and ice management business headquartered in New Jersey.
“We look to have their insurance policies mirror our levels of coverage,” Jomides says. “We prefer to have subs with similar coverage. We just don’t look at the certificate of insurance, we ask questions such as: does their policy contain exclusions that could affect us if there was a claim?”
A top-tier contractor should be specifically listed as “additional insured” on the subcontractor’s policy, using an appropriate endorsement. A statement indicating that the additional insured’s status will be primary and noncontributory over any other insurance you might have. Typically, a waiver of subrogation clause is used on the policies if the state allows for it.
The insurance requirements will generally contain language that requires the subcontractor to provide you with at least 30 days prior written notice before cancellation of any coverage. A clause that will reserve the right to withhold payment or remove the subcontractor from the job site for failing to provide the required proof of insurance may be used to enforce the requirement.
How insurance companies charge for subs
The rating basis for subcontractors is charged based on the total cost of the subs. In many ways the rate per $1,000 is generating minimum amount of premium to cover defense for the insurance carrier. Contractors should keep accurate records of the total cost of subcontracted work and, if possible, be specific to material and labor because how you pay your sub is how you will be charged in subcontractors rating basis.
Separate the total cost of subcontracted work by job and keep your records, including the certificate of insurance, with a copy of the written agreement.
Being able to accurately and clearly determine the amount of subcontracted work can be the difference between a painful and smooth audit for insurance.
A major theme in the ASCA’s Industry Standards is centered on documentation. The goal of your organization should be to make sure all client calls are properly documented and all conversation has an activity attached to the corresponding job file. Snow logs are date stamped, time stamped and details of the client request should be logged digitally to support any legal battle that occurs months after the job is completed.
ASCA standards require a member to advise the subcontractor of the client-specific contract terms. This can be implemented into the subcontractor agreement or explained at the preseason site-inspection meeting with the subcontractor.
Many contracts detail when and where to plow at a given location. Losses can be reduced if everyone knows exactly what is required. In addition, spot-checking plowed locations for work quality is a good idea. Also, be sure subs document any extra service requested by your clients outside the contract.
When it comes to documenting, enforce that the subcontractor working on your job keep the same level of documentation as your managers or employees.
Maintain a clean and organized subcontractor-management system that tracks dates of insurance renewals along with a checklist in a convenient place for the premium audit. At the time of an insurance audit, the insurance auditor will want to see all available certificates of insurance.
If your company uses an uninsured subcontractor or fails to show proof of insurance at the time of your insurance audit, the consequences could be higher premiums.
The moral of the subcontractor story, is be picky and make sure your organization is represented well when you contract with a sub.
Matthew Peterson, CRIS, is a principal at Mills Insurance Group and a frequent Snow Magazine contributor.