Masonry Magazine January 2005 Page. 44
Legal Issues
The Benefits of Risk
Management
Tammy L. Tomblin, Esq.
Associate, Jackson & Campbell, P.C.
Consider this: you arrive at your company office one morning, and an otherwise friendly stranger is there waiting for you. He asks you to confirm your name and whether you are the owner of the company. Thinking that he might be interested in hiring you, you comply. Then, you sign something, and he hands you a stack of documents. Your company has just been served in what could be a very costly lawsuit.
After scanning the papers you just received, you find that a general contractor, with whom you have worked for years, and a property owner, who just a year ago raved about your work, are now claiming that your company is liable for millions of dollars in damages. This lawsuit claims that the building your company helped build is falling down and it is entirely your fault. To make matters worse, the damages claimed exceed $1 million, not to mention the cost of defending the action.
You are very proud of the company you single-handedly built, and you have every right to be. You worked hard, created this business, and made it a success. It might even be growing, hiring more employees, and accepting more projects. Right now, you may be working 12- to 15-hour days, probably every day, and the last thing you need is to worry about whether a lawsuit will bankrupt you.
Are you prepared for such an event? Construction defect lawsuits have become commonplace. The bigger, and more successful, your company becomes, the more likely it is to be sued and I can't stress it enough - for millions of dollars. Unless you have considered the "what-ifs" of such a lawsuit, you are jeopardizing what you worked so hard to create. For small business owners, being sued can be one of the most stressful and costly situations imaginable. Is it any wonder that some are inclined to ignore a lawsuit and hope it simply goes away? Of course, that is the last thing you should do.
Even before this scenario takes place, you should consider whether your company has a good risk management program in place and, if not, you should consider developing one. The following are some suggestions to get you, and your advising attorney, started.
Use an Insurance Broker
IF YOU AREN'T ALREADY using the services of an insurance broker, you should consider doing so. An insurance broker can help you manage and negotiate the high cost of insurance. More importantly, a broker who understands your trade will help your company get the type and amount of coverage it needs.
Let's presume that your company installs brick veneer or synthetic stone. A rising concern among insurers is water penetration, and coverage for claims arising out of failure of certain exterior finishes can be costly. Sometimes, an insurer may try to exclude coverage for damages or conditions caused by water penetration (such as mold) from a policy. If your company is sued for damages relating to water penetration or mold and your policy does not provide coverage, then it will be of no value to you.
An insurance broker can help you seek to avoid such potential problems by negotiating on your behalf to find the best prices and tailor insurance coverage to your company's needs. In some instances, if you engage in a highly specialized trade, an insurance broker can negotiate a policy that is written specifically for your company. In addition, an insurance broker can help you determine the various types of coverage your company needs, including commercial general liability (CGL) coverage, worker's compensation coverage, auto liability, pollution liability, sureties and bonds, errors and omissions coverage, as well as excess and umbrella coverage.
Maintaining adequate coverage is the foundation of any good risk management program, and an insurance broker's services can help you obtain the right coverage, so that if and when your company is sued, you are financially equipped to weather it.
Hire General Counsel
GENERAL COUNSEL is beneficial in making sure that the contracts you sign, and the contracts you want others to sign, are legally binding and do not obligate your company for more than you bargain. Counsel can also advise on how to address contractual requirements when a problem arises; advise you on insurance coverage disputes; explain reservation of rights letters, draft or assist in drafting company policies and manuals; answer lawsuits on your behalf, and assist other defense counsel retained by your insurer to defend you.
Use Training and
Employment Manuals
AN INVENTIVE plaintiff's lawyer will all but throw the kitchen sink into a construction defect lawsuit. An emerging trend has been to include a claim that a construction contractor engaged in "negli-