By Jared Nusbaum
Despite the best intentions, snow and ice professionals sometimes inadvertently damage a customer’s property. Snowplows hit mailboxes and scrape yards; salt dries out grass; icicles fall and damage windows and siding. Fortunately, companies can take several proactive measures to control liability before damage occurs.
Sign on the dotted line
It’s important to have a contract between you and your customers. This may seem like common sense, but in the real world, it can be inconvenient to have a potential customer review and sign a contract. Regardless of the inconvenience, not having a proper contract in place could end up subjecting you and/or your business to extensive costs that could be minimized or erased with the use of an effective contract.
Your customer contract should, where possible, limit liability for acts other than willful or intentional acts. This type of provision can help if a customer tries to make a claim against you for negligence or another type of unintentional tort. You should also have an indemnity provision that protects you and your company from a third-party lawsuit for an issue that is your customer’s responsibility.
If you subcontract your snow and ice work, it’s vital to have a good subcontract that clearly states which party bears the risk of liability for damage the subcontractor causes. The following clauses can clarify your subcontractors’ duties and liability:
Review your CGL policy
- A statement that the subcontractor agrees to take all precautions necessary to prevent injury to the property of third parties.
- A requirement that the subcontractor carry its own insurance that covers damage to third parties’ property and that adds you as an “additional insured.” You may also want to require a minimum policy amount, an “occurrence” basis for claims, a date by which the subcontractor must provide you proof of insurance, and that the subcontractor’s insurance be primary.
- A statement that the subcontractor indemnifies, releases and holds your company harmless for property damage caused by the subcontractor.
- A requirement that the subcontractor promptly document (including photographic evidence) any reported or suspected property damage, notify you within a certain period of time of the damage or alleged damage, and provide you any documentation associated with the damage.
- A statement that payment will be made to the subcontractor only for work done in accordance with the contract, and that if a legal claim is filed against you because of property damage caused by the subcontractor, you may withhold payment in the amount of that claim until it is resolved.
Commercial general liability (CGL) policies typically exclude coverage for property damage arising out of the professional negligence of you or your subcontractors. Although it can be hard to distinguish between ordinary and professional negligence, hitting a mailbox while plowing would probably be ordinary negligence, while over-salting is more like professional negligence. An attorney who specializes in small business law can help you figure out whether a specific type of damage is likely to be considered professional negligence. A professional liability insurance policy can cover damage excluded by the CGL policy.
If you assume liability for property damage in a separate contract (for example, a service agreement with a client), your CGL policy may also exclude coverage for that property damage. There are usually exceptions to this exclusion for damage based on your negligence, but check your policy and ask an attorney if you’re unsure.
Your CGL policy or other applicable policies may have other exclusions, and you should read them carefully and check with your attorney about whether specific types of property damage are covered.
Use your employee handbook
Accidents happen when employees are performing work. However, any policy you want to put in place regarding your employee’s employment status for mistakes made while working for your company should be put in an employee handbook. Further, your employee handbook should instruct your employee(s) regarding the appropriate procedures if there is damage or alleged damage on a job site.
Jump start solutions
- Make sure your contracts address damages and who is responsible for repair and costs.
- Subcontractor agreements should address damage policies.
- Confirm that your insurance policies cover damages.
- If you hold employees responsible for damages, outline your policy in the employee handbook.
Jared Nusbaum is an attorney with the law firm of Zlimen & McGuiness, PLLC in St. Paul, MN. His practice areas include employment law, small business law, litigation and bankruptcy. Email him at firstname.lastname@example.org.