Don’t let vendor liabilities become a liability for you

Most companies will need to undergo some remodeling, repairs, or possibly even an expansion at some point or another. Such work is most often outsourced to a vendor.

Before you hire a vendor to do work at your facility, though, you may want to protect the financial security of your business and make sure of one thing: That the vendor’s liabilities don’t suddenly become yours, too.

For example, if a contract worker suffered an injury on a project at your home or business, you would likely feel sorry for all involved . However, you might not realize that you, too, could be involved. If that injured contractor wasn’t insured, then it could involve an expensive lawsuit against your business. It’s a scenario such as that which often prompts business owners to question how they can best protect themselves when hiring a vendor.

You may get lower bids by vendors not licensed and insured, but an unexpected injury could later result in various legal costs that would far surpass any savings. It can’t be emphasized enough just how important it is to only hire reputable, licensed, and insured companies.

How do I know if my vendor is licensed?

Finding out if a contractor is licensed isn’t very difficult, as any licensed contractor must display their state licensing number on all marketing and advertising materials — such as phone book, billboard, or newspaper ads. Contractors could also display their license on a company logo adorned on a building sign or on any materials they pass out to the public.

How do I know if my vendor is insured?

Finding out if a contractor is insured isn’t quite as simple as looking at their ads, but it is a vetting step that you certainly don’t want to skip. Never work with a vendor that doesn’t have commercial general liability insurance and workers’ compensation. At a minimum, the commercial general liability insurance policy will cover advertising injuries, personal injuries, bodily injuries and property damages.

If your contractor doesn’t voluntarily offer to show you a certificate of insurance as proof that they’re covered by a commercial general liability policy, then you should ask for it. Don’t accept that they’ll bring it by after they’re hired. And don’t forget to check  the expiration and effective dates will be congruent with the dates of the project.

What else can I do to protect my business?

Additionally, you might consider taking the following steps:

Make a list of approved vendors that are both licensed and have shown proof of insurance.

• Ask the contractor’s insurance agent to mail you their certificate of insurance.

• Ask that your company be added to the contractor’s general liability policy as an additional insured until the project is completed.

• Consider only hiring a contractor that has insurance limits equal to your own.

• Ask the contractor to sign a written legal contract indemnifying your company from a liability claim.

• Never work with a contractor that will need to use your tools or equipment to complete the job. Don’t even lend such items to the contractor. If your equipment or tools are defective and cause a contractor to be injured, it could result in a lawsuit.

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