Protecting Yourself from the Liabilities of Others - Risk Management

It is important to involve a lawyer when protecting your business against the liabilities of others. A lawyer will review contracts and keep your best interests in mind. Be aware that although waivers and hold harmless agreements might be effective to deflect liability, there is no substitute for prudent and reasonable due diligence.

4 Steps to Effectively Manage Risks

1. Use signs. They can warn people of hazards, provide information and possibly prevent losses. Do not rely on signs alone to deflect liability. Be sure to:
1. Keep signs simple and easy to understand
2. Make sure signs are placed in visible areas
3. Use universally recognized symbols
4. Ensure sign sizes and colours are appropriate and visible
5. Use all common languages.
2. Use contracts. A contract must be legally enforceable, so consider that:
1. Both parties must intend to create a legal relationship
2. There has to be an offer – a promise to buy/sell/exchange a good or service of value – that is subject to a condition
3. There must be an acceptance
4. Both parties to the contract must receive something of value. For example, a person who leases his or her premises receives money for the rental and the person who is leasing the property receives use of the property, as set out in the contract
5. Both parties must have the capacity to contract. Special considerations exist for minors, intoxicated persons, mentally challenged persons and bankrupt persons
6. The contract must be legal. For example, a contract to purchase stolen goods or perform other illegal acts is not enforceable. Contracts that are contrary to public policy or public interest may also not be enforceable
7. Certain contracts must be in writing to be legally enforceable, such as those that concern the sale of land and that last for a period of longer than one year.
3. Use waivers and hold harmless agreements.
1. A waiver is a clause that states that users, customers, etc., waive their right to make a claim or sue the waived company for a specific activity.
2. Hold harmless and indemnifying agreements are usually clauses in contracts or agreements where one party agrees to protect the other party from legal action arising out of the contract or agreement.
3. Waivers and hold harmless agreements may deflect and transfer liability if they are properly worded.
4. Always obtain legal advice when drafting waivers or hold harmless agreements.
5. Use consent forms if waivers cannot be used.
4. Require insurance certificates. An insurance certificate should be required from people and organizations that you enter into agreements with or who supply products and services to you. Consult your insurance representative for guidance. Generally, if you are at risk for the actions of someone who is performing a service for you, then that person should provide an insurance certificate.
1. An insurance certificate is proof of insurance coverage, but it can also confer certain rights to the certificate holder.
2. A certificate contains all the relevant information that a contracting party might need to know about the other’s insurance.
3. If someone requests this of your organization, forward the request with all the relevant information to your insurance representative, who will issue the certificate.

A Primer on Insurance Certificate Terminology

Many business contracts will stipulate that insurance confirmation is required. You should forward requests for insurance certificates to your insurance representative. When reviewing an insurance certificate, always confirm that it lists your organization as an additional insured. Be aware of key terms such as:

• Cross-liability clause
• Notice of cancellation clause
• Coverages and limits
• Effective dates
• Operations

Remember to get new certificates before the old ones expire. Keep old insurance certificates indefinitely, just as you would your own insurance policies.