If you’re a business owner, you’re well aware of the contractual obligations you’re inundated with. Those obligations tend to cause a lot of headaches and uncertainty, and they span from the agreements you have with your suppliers, lenders, leaseholders, and so on. You may also place contractual responsibilities on your vendors, dealers, service contractors, etc. There are a lot of i’s to dot and a lot of t’s to cross. But it’s critical for you to understand the various insurance provisions and requirements addressed in each contract you’re involved with.
If you’ve read any contract, you know there are words upon words upon words…and by the end, your eyes may be saying, “Give me a break!” But a thorough review is necessary, and there are two important factors to consider when doing so:
- Is my business accepting any unnecessary liability by signing the document?
- Does my current insurance coverage provide the required coverage and limits dictated by the contract?
Staying on top of all of these contractual relationships pose an administrative nightmare. Most businesses are good with their main contracts. However, many struggle with maintaining annual updates on companies that serve their business. This can lead to situations where a vendor may have insufficient insurance coverage — or no insurance at all. In those cases, you could be brought in to pay for your vendor’s accident.
Implement a Contract Management Policy
So, what should you do? I’d suggest starting off with devising a contract management policy. This practice needs to be “owned” by someone within your company where they’re responsible for maintaining standards.
The process should include a protocol for each contract to be evaluated by your insurance consultant. Then, you would confirm the proper coverage and limits are in place to satisfy the language within the contract. Finally, you should maintain an annual system to confirm that all of your relationships are vetted for proper coverage.
And just as a “final final” to it all, don’t forget to reach out if you have questions. We have experts on hand to help you navigate the contractual liability choppy waters. Don’t let your business sink…let us help!
