You decide to do a renovation or addition project. You run your business in this building and you rent out a portion of it to another business. You hire a contractor or sub-trades to do the work and while doing this, they start a fire or cause some other damage to the building.
Tenants or customers may be injured, your business could be shut down leaving you with loss of income, maybe you are fortunate enough to be able to re-locate temporarily with added expenses and therefore you are able to reduce your income loss. Your tenants may also have to do business elsewhere, which may leave them with loss of revenue as well. Your contents and your tenant’s contents are damaged. The buildings on either side could also be damaged.
If the contractor is adequately insured, their insurance policy may respond to all of these losses. If this contractor does not carry insurance and has no other resources, you may be held responsible for all of the losses. Your insurance policy may cover these but you would still be responsible for your deductibles and there is the risk of your renewal premium increasing. If you did not buy adequate insurance, you would have to cover the uninsured losses on your own and you could also suffer the poor PR with your clients, tenants and neighbouring businesses. For example: lack of service or a customer is injured. All of this is irrespective of whether or not you are the negligent party.
The above scenario could put you into a serious financial situation.
What can you do?
- Only hire contractors or sub-trades that have insurance.
- Request Certificates of Insurance to confirm insurance coverage and limit.
- Implement a system to track and verify these certificates.
- Set minimum standards for coverage and limits carried by the certificate providers.
Hiring capable people and having your own insurance in place and having appropriate processes in place to obtain and verify insurance certificates is your best defense. Be sure to seek advice and purchase insurance from those who understand your business!