If you’re going to hire someone to do something for you, be sure there’s a contract and that it calls out all of your expectations.

Our company recently engaged a software company to modify one of our systems. We thought we had been clear about everything during our in-depth planning meetings. A couple of foundational expectations were not outlined in the final version of the contract. We didn’t think they needed to be; as far as we were concerned, they were so foundational that we didn’t see a reason for them to be specifically called out. In fact, to us, it seemed like it would have been like telling a fisherman that water is wet. We thought that insisting on those points being specifically called out would have delayed the work, involved more lawyer time, and frankly, would have been insulting to the intelligence of the software contractor.

Wrong, we learned a very costly lesson from this painful experience. Fortunately for us, we had a very sharp 3rd party consultant run testing of the scripts the day the project finished. We discovered that the work had failed. The software company fixed the program, but things could have gone so much more smoothly if we had been just a little more engaged in the beginning stage of the project and so much worse if we hadn’t checked their work. Lesson learned.

That experience was all about software. However, many projects and contracts involve physical things like building something. Physical stuff like structures or machinery or the placement of equipment. If calamities happen or any of those things break, malfunction, or result in an injury to someone, you can be in big trouble.

Always include an indemnity clause that favors you, the party that’s having the work done. And require that you be named as an additional insured by the contractor’s insurance carrier.

CAUTION: If you are relying on the contractor’s contract, you might be asking for trouble.

Before signing a contract, review it, get your insurance broker’s perspective and if there are any remaining concerns, have your attorney look it over. Taking just a handful of brief and inexpensive precautions can save you time, frustration, and money, in the long run.

Here's an indemnity clause that I like. It fits most situations, and it’s not totally one-sided. In our experience, most contractors and attorneys will concede to adopt this version as a replacement for their (likely) less favorable version.

Indemnification and Hold Harmless Clause: The contractor shall indemnify, defend, and hold harmless the Owner, its lenders, parent companies, and affiliates, and the directors, officers, shareholders, agents, employees, and representatives of each of them (individually, “Indemnitee” and collectively, the “Indemnitees”) from and against any and all third-party (including, without limitation, those by employees and agents of Contractor and/or subcontractors of Contractor) suits, actions, legal or administrative proceedings, claims, demands, costs, and expenses (including, without limitation, court costs and attorneys’ fees) of any nature for bodily injury or death or physical damage to property of any of the Indemnitees or third parties arising out of or in connection with the performance of the work. The indemnity provided for in this paragraph shall have no application, however, to any suit, action, proceeding, claim, demand, cost, or expense where such injury, death, or damage results from the negligence, either active or passive, and/or sole or contributory, or the willful misconduct of Owner.

Remember to seek feedback from your legal advisor before using this or other referenced examples here on uwibRisk.com. We are Risk Managers, so we deal with contract law every day. We’re not attorneys, so our rates are only $275./hr.

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