In an increasingly litigious society and with substantial risks ever-present in roofing, it is prudent for all firms to make sure that they have robust insurances in place.
Ultimately, the risk of cutting corners and being underinsured is something which, although we come across regularly, is a danger to your employees and the very existence of your business.
With risks apparent both up and down the supply chain, roofing contractors are arguably one of the most vulnerable groups to risk in today’s industry. They are vulnerable from up the chain, as they depend on prompt payment of invoices in the same way as their subcontractors depend on them, as described below. Credit insurance – traditionally an expensive option but becoming more affordable as the state of the economy improves – may be a choice here.
The main threat to contractors, and the one which we come across increasingly and regularly in our work, is the risk of the under-insurance of subcontractors.
Usually, the principal contractor will have Public Liability insurance cover for at least £5 million, preferably £10 million, to cover any of the myriad of mishaps which may take place during the course of their contract.
Subcontractors, who may prefer to pay the lower premiums for a Public Liability policy offering cover for just £1 million, may have less comprehensive cover than required by the terms of the contract.
If an independent roofer who is insured for just £1 million of Public Liability cover causes damage to a property needing £2 million of repairs, two things may happen depending on the wording of warranties or conditions.
The best case scenario is that the principal contractor will have to pick up the tab through their own insurance, and their insurers manage to recover the first £1 million from the insurers of the negligent contractor.
This is also likely to result in an increase in premiums which can make a significant difference to the prosperity of a business. However, if the sub-contractor’s insurance policy has onerous conditions or warranties this could mean that the principal contractor could find themselves having to fund the entire repair costs. This is because they are in breach of a policy condition that allows their insurers to refuse the claim in full.
Contractors should also make sure that the staff tasked with sending out contracts or purchase orders to tradespeople are sufficiently trained in understanding the importance of these insurance related issues. They may seem like minor affairs but the consequences can be huge and your staff should understand that.
One final mention needs to be made of hot work – use of blow torches, hot air guns, welding gear, bitumen boilers and grinders. This use of heat and flame is often not covered under insurance policies for general building and if you ask subcontractors to undertake such work without specific policies to cover it then they, and you, risk having no cover at all.
Of course all of the risks up the supply chain which apply to contractors – particularly regarding late payment of invoices – can be applied to subcontractors as well. Indeed it is the smallest businesses which are most likely to be on the hand-to-mouth knife edge of needing prompt payment.
Our advice would be threefold:
- Firstly, the onus is on the main contractor to check covers and limits for all their sub-contractor’s insurance policies.
- Secondly, make sure that the company contracting out the work is reputable and reliable.
- Thirdly, protect against this threat by having terms clearly laid out before engagement, so they have something on paper which protects them against the risks. It is worth at least taking advice on this, especially if the subcontract is substantial.
No matter who is addressing the risk, the general principles must be the same – be thorough, take advice if necessary and make sure that all paperwork and policies are in order prior to work commencing. While the burden of being thorough may be viewed as costly and time-consuming, across the board the risks and consequences of failing to do so may not be worth taking.
Guest blog post by NFRC Supplier Member, Kerry London Ltd (Neon Mavromatis)