Rancho Mesa's Alyssa Burley and Media Communications & Client Services Specialist Lauren Stumpf unpack the contractual risk transfer workshop hosted on August 18, 2023 by Rancho Mesa Insurance Services, Inc.

Show Notes: Subscribe to Rancho Mesa's Newsletter www.ranchomesa.com/workshops-and-webinars

Director/Host: Alyssa Burley

Guest: Lauren Stumpf

Producer/Editor: Megan Lockhart

Music: "Home" by JHS Pedals, “News Room News” by Spence

© Copyright 2023. Rancho Mesa Insurance Services, Inc. All rights reserved.

Transcript

Alyssa Burley: Hi, this is Alyssa Burley with Rancho Mesa's Media Communications and Client Services Department. Thank you for listening to today's top Rancho Mesa news, brought to you by our Safety and Risk Management Network, Studio one.

Welcome back, everyone. My guest is Lauren Stumpf, Media Communications and Client Services Specialist with Rancho Mesa. Today, we’re going to unpack the contractual risk transfer workshop we hosted last week. Lauren, welcome to the show.

Lauren Stumpf: Hi Alyssa, thanks for having me.

AB: Of course, so on Friday, August 18, 2023, Rancho Mesa hosted an informative workshop called ‘Safeguard Your Company with Contractual Risk Transfer.’ We hosted it at the Mission Valley Library. Our presenter was Alan Coppola from Travelers. Lauren, will you give listeners a short explanation of contractual risk transfer and why it’s important?

LS: Sure, according to Alan, the process of a contractual risk transfer allows a business to identify and effectively manage its liabilities arising out of business relationships with other contractors, vendors, owners, architects and engineers. In simpler terms, construction projects involve multiple employers on one jobsite, so an injured person may have more “parties” to sue. On construction projects, contractors frequently clarify and shift responsibilities, duties, and rights by means of contracts.

AB: So, contracts that identify and manage, or shift, liability is important to understanding what risks you, the contractor, or the subcontract, are taking on?

LS: Yes, effective risk transfer can save you money by lowering your overall cost of risk and keeping you competitive in the markets in which you operate. Because your business may be a party in a number of contractual relationships at any one time, it is essential to control the type and magnitude of the liabilities you may assume via a written contract.

AB: Excellent point. You don’t want to be liability for actions beyond your control and you certainly don’t want that kind of liability across multiple projects. So, how are contracts used as a mechanism for transferring risk?

LS: Generally, contracts contain two methods for transferring accident risk and completed operations risk from a higher tier contractor/owner to lower tier contractors. Those include an indemnification clause and an insurance requirement for the lower tier contractor to provide additional insured status to the higher tier contractor under the policy of the lower tier contractor.

AB: Okay so essentially, whether you’re the contractor or the subcontractor, you want to negotiate the contract so that you’re not taking on additional liability. How did Alan recommend businesses do this?

LS: Alan mentioned that businesses should assess their organization’s implementation of its contractual risk transfer program. Write down how you’re going to handle risk transfer in contracts. Have clear lines of authority that spells out what language modifications or exceptions need to be made. Identify how you are managing insurance certificates. Have clear documentation in your job files and review the contracts annually with legal counsel. That’s just some of the things Alan recommended.

AB: If listeners are concerned that they may have taken on too much risk in their project contracts, what does Alan recommend they do now?

LS: Work with your legal counsel and your trusted insurance professional if there are areas that may leave you overly exposed. It is always best to negotiate the contract terms upfront prior to signing, then finding out after a claim that your liability is more than it should or could have been.

AB: Wow, great stuff. Lauren, thank you so much for joining me in StudioOne.

LS: Thanks Alyssa.

AB: This is Alyssa Burley with Rancho Mesa. Thanks for tuning into our latest episode produced by StudioOne. For more information, visit us at rachomesa.com and subscribe to our weekly newsletter.