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When contemplating entering into a relationship with a contractor or service provider, homeowners may face liability exposures that they had not previously thought about. These exposures range from injuries to third parties arising from a general contractor’s operations during the construction of a new home to damage to a neighbor’s property by a negligent landscaper.
Prior to entering a contract with the contractor or service provider, homeowners should ensure that the contract outlines the rights and responsibilities of each party in order to mitigate this exposure to additional liability. Within the contract there should be a mechanism that transfers liability arising from the services performed away from the homeowner and back to the contractor or service provider.
Typically, there are two ways to address the transfer of liability in a contract. The first way is to have a hold harmless and indemnity clause in the contract running in favor of the homeowner. In layman’s terms, this clause says that the contractor or service provider accepts all liability for injuries or damages arising from the work performed and promises that the contractor or service provider will pay all of the legal expenses incurred by the homeowner and any damages awarded to an injured party. The second and more effective way to transfer liability is to have an insurance procurement provision in the contract that requires the contractor to maintain specific types and limits of insurance, and name the homeowner as an additional insured. Ideally, a contract would contain both of these provisions.
At BWD, we have a Technical Services staff with both legal and insurance backgrounds available to assist our clients’ attorneys in drafting the provisions mentioned above. Our staff can guide an attorney through the risk transfer process and provide sample provisions that the attorney can edit and incorporate into a particular contract. This is a service that BWD provides to all of our clients and one we strongly encourage our Personal Lines clients to utilize. |
