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Bracing for change

By:
  • Darryl Beckman
- Posted: November 2, 2016
Budget-conscious property managers have been on a rollercoaster the past few years with wild swings in snowfall fluctuations. This has resulted in a variety of requests that can dramatically impact a snow contractor’s liability and costs. Following are some of those requests and how to protect your company in the event you choose to accommodate:

Requests for contract type changes
It is not uncommon for service providers to be asked to change contracts or contract terms following an unusually busy (or slow) winter. Generally, after a winter with greater than anticipated level of service at greater than anticipated cost, property owners and management companies will request a flat fee or seasonal contract moving forward. The simple benefit to property owners and management companies for flat fee or seasonal contracts is cost control. Seasonal contracts are commonplace but beware of the following:
  • Understand the requirements of the proposed contract. Many seasonal contracts require the snow and ice management company to perform any and all services to keep the premises clear of snow and ice at all times. This contract gives the snow and ice professional complete discretion in performing services but requires significant resources and carries significant potential liability. Specifically, if the snow and ice professional has discretion to perform whatever services are necessary, the company may be found responsible for any accident caused by snow or ice on the premises.
  • If the service agreement includes a target or trigger for the start of service (e.g., accumulation minimum), make sure the contract is clear that the property owner or management company is responsible for any legal claims arising from storm events with accumulations under that trigger. You don’t want your company held responsible for a personal injury claim for improper clearing when you were not authorized to perform services.
  • Finally, price carefully. I have seen too many clients lose money when improperly pricing a flat fee or seasonal contract. It is imperative the snow and ice professional rely on the history of a jobsite along with cost projections going forward. Additionally, take into account potential rising costs of labor and supplies when pricing a seasonal or flat fee contract. Do not allow your company to end up in a situation where you are losing money based on the level of service required on an improperly bid contract.
Of course, the pendulum swings the other way for property managers who have seasonal contracts and a low-snow winter. Snow and ice management professionals who carefully construct their portfolio for a balance between contract types may find requests for a change could upset that balance. Carefully consider agreeing to these requests knowing a shift can increase your exposure to liability and negatively impact cash flow and profit margins.

Requests for more/fewer salt visits

Property owners and management companies may restrict or limit services to save money. A snow and ice professional does not want to alienate a customer by arguing services are necessary when a client does not want services, but they must protect their companies from lawsuits caused by limitations on services imposed by the customer.

I recommend written confirmation of the customer’s instructions to delay, limit or restrict services. As an example, if a property owner instructs your snow clearing company to limit pre-salting services, confirm this instruction through a brief note sent via fax. Keep a copy of the fax, along with the confirmation of delivery, to protect your company in the event of a lawsuit.

While this recommendation may seem overly broad, I have taken hundreds of depositions and seen countless examples of honest people who have different recollections of events that lead to lawsuits.

Written confirmation of any instructions or requests to limit or restrict services is simply good common sense.

Requests for more/less overall service mid-season

Any mid-season change to the service contract must be documented. This is essential since the contract outlines the duties, rights and obligations of all parties to the contract. If the contract does not accurately set forth the relationship of the parties because of mid-season changes, the contract is worthless. I always recommend a snow and ice management company perform no services without a written contract. In the event of ambiguity or allegedly incorrect terms to a contract, the determination of what was contractually required will belong to a judge or jury. This leads to unpredictability and uncertainty and can be avoided simply by making sure all changes to a contract are documented before services are performed.

Requests for additional coverage

Any requested changes to insurance requirements must be presented to the insurance carrier and/or insurance agent for the snow and ice management company. The insurance company must approve any change to coverage. Without formal approval of a requested change to coverage, the change is not effective. There are some requirements insurance companies may not accept. As an example, a property manager may demand higher limits of insurance coverage for storms exceeding 12 inches of accumulation, but the insurance company for the snow and ice management company may not offer this coverage.

Requests for service documentation
I always recommend providing clients with detailed service documentation. In this year’s State of the Industry, 55% of respondents reported clients require paperwork detailing time and materials used. The detailed information allows your clients to understand the services your snow and ice management company is performing and allows you to fairly bill for all services. There is no reason to avoid providing requested information and documentation to clients, unless compiling the requested information is an onerous task creating unnecessary and costly additional expense to your business.

Contracts are often somewhat vague in specifying required service documentation, although many contracts explicitly discuss the timing of submission of service documentation and invoices. Pay close attention to these requirements, and to any requested changes. I have encountered situations of a refusal to pay snow and ice management companies for documentation and invoices submitted out of time.

State of the Industry insights
  • Impact issue: 22%. Percentage of respondents who said managing client expectations vs. contractual scope of work was a challenge in 2015-16
SOI_ClientRequests_edited

Darryl Beckman founded Beckman Law Offices, a law firm with offices in New Jersey and Pennsylvania. Darryl works for major insurance carriers throughout the United States, and also engages in representation of and consultation for large and small snow and ice management companies throughout North America. Contact him at darryl@beckmanlawgroup.com.
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