Contract Language and Risk Management from Legal Perspective Joshua Ferguson, Esquire

Managing Risk to Protect YOUR COMPANY In order to properly manage risks the parties must understand those risks Throughout the process, from bidding through billing and collections, the all entities involved need to constantly ask “Have we done enough?”

How Do Personal Injury Claims Against Contractors Arise Poor quality of work Lack of site planning, documentation of existing property conditions Poor post-service documentation Negligence of employees Negligence of clients Lack of thorough contract Lack of agreement on scope of work with the customer Inadequate transfer of risk (subcontract agreements) Subcontractor does not fulfill scope of work Negligence of sub- contractors

Protecting Your Company From the Beginning Reducing the Frequency of Claims by Mitigating Exposure by changing/modifying the following: Execution plan Documentation Employee Training Contract Negotiation Change the way you prepare, perform and follow-up your job duties Change the way you document consistent with ASCA industry standards

Develop a Service Plan Developing the plan Importance Who is in charge of “making the call” Leave nothing to chance Importance Organized attack Maximize productivity Everyone will be on the same page Limit the risks Methods of Fighting the Storm: this will be the meat of the plan and should detail what equipment you will use and where, who will operate that equipment and which areas to clear first. The plan should be as specific as possible and should be minutely detailed. This will ensure that everyone knows exactly what to do if a crewmember cannot participate for any reason. This plan should be self-sufficient, so that anyone can follow its content and detail. Communicate is Key to Success

Why Documentation is so Important There is a direct connection between the length and breadth of a companies loss runs and the documentation policies of those companies Why do I need to maintain documentation? In the claims process and litigation, written documentation created near in time to the service performed holds greater weight than a person’s word that the service took place. Notes for Elaboration on First Bullet Point Lack of documentation can be the death knell in litigation, resulting in the loss of a case at trial and/or the matter settling for a higher payout. Notes for Elaboration on Second Bullet Point 1. People tend to protect their own interests, which in litigation means saying what benefits them most. As such, documentation that was prepared without anticipation of litigation is more trustworthy than someone’s self-serving statement given during litigation that lacks documentation to support it. 2. A proper document management process shows that you are a diligent, organized company that can be trusted. It will also refute what anyone says to the contrary.

Documentation Before Incident Employee training documentation Qualifications/ Investigations related to subcontractors Pre-site inspection records (Photographs) In-event documentation (Photograph before and after) Companies that do not have proper contracts, site inspection records, in-event documentation or post-event documentation procedures in place are more likely to get sued and more likely to have large verdicts or settlements in the cases they are named in

Documentation After Incident Post-event documentation procedures Log notes or invoices for each service including name of employees on site, work performed, exact time performed, equipment used, and materials used Follow-up inspection Change orders/Purchase orders Communication with Client

Pictures, Pictures, Pictures Take pictures of everything Pre-Site Inspection Before and After Services Follow-up Inspection End of the Season

The Contract All contracts should be confirmed in writing and executed by both parties Key provisions: Scope of services should define initial trigger; mean, manner and method of service; any follow-up obligations Indemnity provisions

Problems Created from Poorly Written Contracts Who is on the hook? Lack of agreement on scope of work with the customer Inadequate transfer of risk (subcontract agreements) Lack of incentive by client/customer to timely pay Negligence of sub-contractors Watch out for claims of negligent hiring/supervision

Contract Negotiations – Scope of Work It should define specifically how, when, and where the professional will perform operations It should define exact payment terms, and penalties connected with failure to pay (termination of contract, interest, additional rights in recovery process) The more ambiguity in the contract, the more we are at the mercy whatever the parties to a lawsuit testify to several years after the incident How much discretion is left to the contractor? Does the client have to approve or sign off on services? Elaboration Bullet Point 3 The less duties a contractor takes on, the less risk they are exposed to If they are subbing out work, they need to require this same level of detail from the sub-contractor Elaboration Bullet Point 4 If so, culpability is limited if and when you obtain the sign off

RECOMMENDATIONS TO STRENGTHEN DEFENSE OF CLAIMS Contract language additions When executing on client paper, consider adding liability limiting language into the scope of services (potentially attached as exhibit). Some examples of language recommended: Contractor will not be responsible for snow or ice that results from defective site conditions, including but not limited to drainage of down spouts, roof, balconies, awnings, canopies or improper grading, blocked or insufficient storm or water drains. Further, Contractor will not be responsible for claims that arise due slip and falls on painted curbs or parking stops. Elaboration Bullet Point 3 The less duties a contractor takes on, the less risk they are exposed to If they are subbing out work, they need to require this same level of detail from the sub-contractor Elaboration Bullet Point 4 If so, culpability is limited if and when you obtain the sign off

RECOMMENDATIONS TO STRENGTHEN DEFENSE OF CLAIMS Examples continued: Contractor will not plow within two (2) feet of parked vehicles, cart corrals, or in between parking stops and vehicles. Further, Contractor will not plow in between parked vehicles. Client understands it maintains a responsibility to inspect the Work performed by Contractor to determine if it is satisfactory and to their specification. If client does not advise Contractor that there is a need for additional snow removal or de-icing services, then the parties hereby agree that Contractor has satisfactorily performed its contractual duties at the time. Elaboration Bullet Point 3 The less duties a contractor takes on, the less risk they are exposed to If they are subbing out work, they need to require this same level of detail from the sub-contractor Elaboration Bullet Point 4 If so, culpability is limited if and when you obtain the sign off

RECOMMENDATIONS TO STRENGTHEN DEFENSE OF CLAIMS Examples continued: Contractor will not plow within two (2) feet of parked vehicles, cart corrals, or in between parking stops and vehicles. Further, Contractor will not plow in between parked vehicles. Client understands it maintains a responsibility to inspect the Work performed by Contractor to determine if it is satisfactory and to their specification. If client does not advise Contractor that there is a need for additional snow removal or de-icing services, then the parties hereby agree that Contractor has satisfactorily performed its contractual duties at the time. Elaboration Bullet Point 3 The less duties a contractor takes on, the less risk they are exposed to If they are subbing out work, they need to require this same level of detail from the sub-contractor Elaboration Bullet Point 4 If so, culpability is limited if and when you obtain the sign off

RECOMMENDATIONS TO STRENGTHEN DEFENSE OF CLAIMS Examples continued: If client declines to have the Contractor apply the Services to any portion of the Premises, the Owner acknowledges that the Contractor is not responsible for any damages or claims whatsoever relating to or caused, in whole or in part, by the failure to apply the Services to the Premises in any particular circumstance Client shall defend, indemnify and hold harmless Contractor, it’s owners, agents, consultants, employees, and subcontractors, from all claims for bodily injury and property damage that may arise as a result of any acts or omissions by Customer, its agents or employees. Elaboration Bullet Point 3 The less duties a contractor takes on, the less risk they are exposed to If they are subbing out work, they need to require this same level of detail from the sub-contractor Elaboration Bullet Point 4 If so, culpability is limited if and when you obtain the sign off

Contract Negotiations – Hold Harmless or Indemnification What is it? It is an affirmative assumption of the financial consequences for liabilities of another through a contract Why is it important? Protects parties from being held responsible for the negligence of others Often required by the property manager or owner, and can be required by the insurer in certain situations Can significantly effect exposure and liability Anti-indemnity bill will help contract language negotiation power

Indemnification and Hold Harmless - Examples Look for broad, sweeping language such as: Contractor agrees to indemnify, defend and hold harmless property owner/tenant/property manager from and against any and all claims and liabilities incurred by owner based upon, arising out of or in any way related to the services contemplated by this contract  Contractor shall indemnify, defend and hold harmless customer from and against any and all claims, whether actual, threatened or alleged, arising out of or in any way connected from any act or omission by Contractor

The Contract Other areas of focus in the contract: Payment terms should be well defined Limitation on responsibility for Acts outside of contractor’s control (Anti-Indemnity bill strengthened bargaining power) Ability of parties to terminate agreement With or without cause Right to correct errors Penalties following termination

Contract Negotiation Tactics Try to get client to sign your contract. If you are forced to sign on client paper: First, ensure that the scope of work, indemnity, payment, and termination sections are well defined and fair. If possible, attach your own scope of work as an exhibit, and incorporate protective language within that scope of work. Have counsel and your broker review contracts with troubling language. If client does not let you alter their contract, try to get protective language in through a detailed scope of work exhibit/addendum

Joshua Ferguson, Esquire Any Questions? Joshua Ferguson, Esquire 267-546-5889 jferguson@fmglaw.com www.fmglaw.com