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Transferring Risk



Have you ever hired a subcontractor to do some kind of work or service for your company? If you have, then you probably know that transferring risk is vital to protecting your business.

When you hire a subcontractor to do work on your business location or premises, you as a company, may take most (or all) of the liability of the work the contractor does. This could be anything from hiring a contractor to replace the roof of your building, to hiring a contractor to plow your parking lot during the winter. If you don’t have proper risk transfer in place, your businesses assets, customers, and employees could be at risk. These risks could include repair expenses in the event of a claim, legal costs, and awarded damages. 

Here are two examples of claims where risk transfer could have prevented problems:


  • A general contractor was building an office building hired a subcontractor to install the roof. One of the employees of the roofing subcontractor crew fell and was killed. There was trial, and the cost in damages was millions of dollars, which did not include the additional defense fees. Without adequate risk transferring, the general contractor paid for most of the claims.

  • The owner of a clothing store hired a contractor to remove snow from their front sidewalks and parking lot. During the winter, ice built up on the parking lot, which resulted in a customer falling and getting injured. This then turned into a large claim against the owner of the store. Although the injury resulted from the poor work performed by the contractor, the clothing store owner had to pay for the claim, because their risk plan was not sufficient.

    The solution to both of these scenarios is risk transfer. Any business hiring out work to a contractor should require them to have a certificate of insurance. This proves that they are covered and protected; however, that proof of insurance does not guarantee protection. A couple of other things that you can do are to have the contractor list your company on their insurance policy or have a written contract with them. A contract provides a final layer to your risk transfer plan. This can cover areas such as safety, insurance requirements, waivers, etc.

    Always have a plan to protect yourself when hiring an outside person to do work at your establishment. Do not just assume that the person you hire is insured fully. Talk to your insurance agent to assist you in developing a risk transfer plan.