As business owners, we purchase liability insurance to protect us from the financial impact of a lawsuit. And although the insurance company will respond to a covered claim, it makes sense to try to reduce or eliminate the potential for a lawsuit before it happens. For example, if there is a loose step leading into your building, you should repair it to reduce the risk of causing someone to fall, causing injury, and therefore suing you for damages. This is good “risk management”.
One important area of risk management involves legal contracts. The contract is an agreement that spells out each party’s responsibilities. When signing such an agreement, you are putting yourself at risk of not fulfilling the terms of the agreement. Therefore, doesn’t it make sense to practice good risk management by reading and understanding exactly you are promising to do?
Let’s look at an example…
A management company hires a contractor to plow snow for the season. A clause in the contract requires that there be “bare pavement at all times” during the winter season. On a very windy day, there is snow drifting across the parking lot and a customer slips, falls, and hurts his back. He sues the business and the management company, who in turn sues the contractor for failing to keep the parking lot in a condition of “bare pavement”.
One may argue that there are times when it’s impossible to keep all pavement free of snow under certain conditions – and they would be correct. However, the contractor did not question that wording in the contract, and now they are potentially liable for failing to do what they promised.
The point is that you need to make sure that you can do what you promise to do. If you don’t understand or don’t agree with the wording in a contract then you should have a qualified attorney advise you. Yes, it will cost some money, but the cost is minimal compared to the potential cost of a lawsuit.
Bill Burke is a Multiple Line General Agent with Farm Family Insurance Co. and is a Certified Insurance Counselor located in Glenmont, NY. You can contact him at BillBurke@Farm-Family.com or (518)431-5555.
This blog is for informational purposes only and does not offer insurance or legal advice. It is recommended that you contact a competent licensed insurance professional to review your specific insurance program.