Let’s say for a moment that you have a business and you rent out a portion of your business building to another business. Now, you hire a sub-trade to do some work in this building and they start a fire.
Tenants may be injured while escaping from the fire, the building may be damaged and your business could be shut down or relocated which leaves you with loss of income and/or added expenses. Your tenants may also have to do business elsewhere, which may leave them with loss of revenue. The contents of your building would be damaged and the building next to yours could also suffer damage.
If the sub-trade is adequately insured, their insurance policy may respond to all of these claims. If this sub-trade 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 losses but you would still be responsible for your deductibles and there is the risk of your renewal premium increasing at renewal. If you did not buy adequate insurance, you would have to cover the uninsured losses on your own and you could also suffer poor PR with your clients. 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 bankruptcy.
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 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!