You Don’t Know What You Don’t Know about Contracts
We all can agree that contracts are a must in this industry – an absolute must. When a lawsuit is a mere ticked off customer away, it is imperative that contracts be clear and concise. I know the contract process can seem quite laborious, but it truly is your first line of defense when it comes to claims being made against you.
Your contract can make or break your case. Your best protection is having a contract between you and the end-user directly, but what happens when you are acting as a subcontractor for a third-party organization? What protections may or may not be available?
Lately we have seen many applications for insurance indicating an applicant is acting as a sub for a third-party organization. When we get to the “Do you have contracts in place” questions, too often the answer is a resounding “No.” As an underwriter, this is an immediate red flag – no contracts… in this industry? What are they thinking?!
Most of the time, there is some kind of contract in place, you just usually aren’t a directly named party to it. But just because you aren’t an immediate party to that contract does not mean that you should outright dismiss it as being able to provide you with any kind of protections.
You don’t know what you don’t know, so how about you get some knowledge. Never be afraid to ask for at least a sample of the end-user agreement. The worst a company is going to tell you is “No” and you are no worse off than you were before you asked, right?
Once you get a copy of that contract – get advice! Ask someone to review to see if there are any broad, sweeping statements related to “any and all subsidiaries, employees, contractors…” within the contract. While I am certainly not fond of these clauses when they are being asked to be added as Additional Insureds, there is potential that it could provide you with some protection should you be acting as a subcontractor. Again, it never hurts to ask and it never hurts to look.
If They Say No
So, the company said no – you can’t have a copy of the contract or that contract doesn’t provide you any protections. The next step would be to find out if there is something you can put into place that would be a part of your work order the end-user might be able to sign. You’ll need to know if this is allowable via your agreement with the company.
If there is nothing from a contractual standpoint preventing you from having the end-user sign something giving you some protection, then you need to implement it. Ken Kirschenbaum can help here. Ken has represented the alarm industry since 1977. Not only can he provide advice, but he has standardized contracts that have been tailored to the alarm industry and the specific scenarios that may be unique to your business model. Security America often refers dealers and integrators to Ken (kirschenbaumesq.com).
At a minimum, you need some kind of subcontractor arrangement with the company you are doing work for, but make sure you review those contracts and ensure they have the appropriate protections in place. Strike out clauses that are one way and not in your favor, negotiate the terms of that contract. Again, the worst they are going to tell you is “No” and your no worse off than when you started. Be your own advocate.
Reconsider Your Business Relationship
This is a big ask, I know. At the end of the day, how willing are you to work with a company that doesn’t allow you to afford yourself with some protections. It would seem unfair (stomping my feet like my preschooler) that Company A can get all the protection in the world, but I can’t get any? Not even something as simple as a limitation of liability clause? What about a work order sign off? There has to be give and take within a business relationship that is more than just a simple monetary exchange.
At the end of the day, having good contracts in place not only saves you money when there is a dispute related to your services, but also can save you money on your insurance. As a leader in the market when it comes to insurance for the security industry, we consider the contracts you use the most important item you can use to risk manage your exposures. Ensuring that you are in a good position before a claim happens is our priority at Security America. If you aren’t with Security America yet, contact us to get your no obligation quote today! ESA members save 20% on their policies.