Contracting companies with busy schedules and complex projects can forget to keep their paperwork, documents and contracts in order, but it’s important to keep a paper trail of your work and practice due diligence. Keeping all of your working documents in order shows that you treat your business, customers and subcontractors responsibly. It can also be important for your insurance company when assessing your business or defending your business after a loss.
When purchasing insurance
Underwriters will want to have access to any business documents that help them see the big picture so they can correctly assess your insurance needs. When doing a review of your business, they want to make sure that they’re correctly classifying your risks and identifying your exposures. Understanding your business costs and operations helps the underwriter ensure that you’re getting the right coverages and insurance limits to properly protect your business.
Businesses without adequate documentation can be rejected because their risk profile is unknown. In general, businesses that are doing their due diligence by taking the necessary steps to properly document their work show that they have good housekeeping practices and are more organized. Insurers prefer this because these types of contracting businesses are often more successful and have better risk management practices.
When a loss occurs
Many claims from contracting businesses have to do with losses stemming from liability lawsuits. In many of these lawsuits, the contractor is being charged with negligence after an incident occurs where property was damaged. Being able to provide the necessary documentation can be helpful if your contracting company is wrongfully blamed for an incident.
It’s the responsibility of the contractor to obtain, maintain and keep their records easily accessible. There have been lawsuits where the contractor has been liable for incidents that were actually caused by the work of a subcontractor. Without the right documents to prove that the work was performed by the subcontractor, the contractor may ultimately be held responsible for the work, without recourse against the subcontractor.
Documentation and procedures
If you haven’t already, you should develop documentation and record keeping procedures that are appropriate for your contracting operation or service. Once procedures are in place, it’s equally important to ensure that all managers, supervisors, site foreman and workers understand and follow the procedures. Holding a workshop on documentation retention procedures with your employees and having employees signing off that they understand and have copies of the procedures is good due diligence and company practice.
Some of the documents that should be obtained and maintained as part of your documentation procedure with respect to your construction jobs include:
- Project tenders/estimates
- Contracts or work orders
- Duty to perform documents
- Site inspection forms
- Tests on work completed
- Documentation for materials delivered to the site
- Documentation of your risk services assessment
- Certificates of insurance from your subcontractors
Keeping your documentation and performing due diligence on your subcontractors are recommended risk management practices for contractors.
