October 15, 2009
By Robert Kennaley
McLauchlin & Associates

Robert KennaleyLast month, we discussed the possibility that a crisis in insurance for winter maintenance contractor operations either is, or may soon be, once again upon us. In that regard, I wrote what contractors can do to manage the risks associated with winter maintenance contracts, through contracts and at the job site. This month, we will discuss what contractors can do to protect themselves after a claim arises, as well as how contractors may get involved to address problems from a more broad-based perspective.

The best contract in the world may not, of course, protect the contractor from being sued for a slip and fall. Claims might be advanced against the contractor where he has done absolutely nothing wrong. Where a claim is made against a contractor, it is important that the contractor properly manage that claim.  

Be prompt

First, in order to respond to notice of a slip and fall claim on a timely basis, the contractor must promptly open correspondence from his client and/or the insurer. Second, a contractor who receives notice of a slip and fall claim should never discuss the claim with the claimant, or the claimant’s representatives, until the contractor has informed his insurer of the claim, and even then, only with the insurer’s written consent. If the contractor does enter into such discussions or negotiations, the insurer can take the position that it has been ‘prejudiced’ by the contractor’s conduct, and deny coverage. The point to remember in this regard is that the insurer, because it may be obliged to provide a defence and indemnification in relation to the claim, is entitled to manage the negotiations and communications surrounding the claim, in order to protect its position.

The insurer should be provided with a copy of the winter maintenance contract, along with the documentation the contractor would rely on to show that he performed his work as required. This would include all records relating to the performance of the work in question, as well as all documents supporting the fact that a reasonable system and policies were in place to ensure that the work was properly performed. This would also include documentation of the contractor’s training programs for employees and subcontractors. Copies of any policies or procedures that have been signed-off on by the personnel who performed the work in question, should also be provided to the insurer. Finally, any communication between the contractor and the client, with respect to the services, should be provided to the insurer.  Most important in this regard are any documents which speak to the contractor’s scope of work, to limitations on the contractor’s ability to manage the risk of a slip and fall, or to client decisions about which ice melting products to be used, where and in what quantity. This is because such documentation may tend to show that the client decided to do less than what might have been done to prevent the slip and fall in question. For example, if you have proposed the use of liquids or time release formulas as a better option to manage the risks, and the client has declined the option, this decision should be confirmed in writing and documentation in this regard provided to the insurer in the event of a claim.

Right to settle

All of the above is towards putting the insurer in the best possible position to defend the claim. Insurers, however, generally have the right to settle a claim on behalf of the insured. It is also true that, even though the obligation to manage the risk of a slip and fall starts with the client (who is the occupier at first instance under the Occupier’s Liability Act), insurers have at times agreed to make settlement contributions on behalf of contractors without assessing the extent to which it was the client, and not the contractor, who decided to minimize the scope and nature of ice melting applications.  

It is therefore important that the contractor make the insurer aware of his position as soon as possible. If the contractor believes he has met his contractual obligations, without negligence, the contractor should state this in writing. The contractor should make it clear that, in his view, he is not liable and that he wishes the insurer to defend the claim on his behalf.

Accepting settlements

Unfortunately, even where the contractor has met his contractual obligations and has done nothing wrong, the insurer might pay out on the claim for business reasons, given the costs and risks associated with protracted litigation. The contractor’s only option, which is often but not always available in such a circumstance, is to accept the amount of the settlement offer from the insurer himself, and use those funds to defend the claim himself. In that circumstance, however, all the legal costs will be to the contractor’s account and should the contractor be found liable, it will be the contractor who is responsible to pay the claim.  

Winter maintenance contractors, who are concerned about the state of the industry when it comes to contractual issues, such as rising premiums in the insurance market, the ability to get insurance at reasonable rates, or the potential for payouts when they are not at fault, may wish to become active in groups such as Landscape Ontario and its Snow and Ice Management Sector. Topics such as those discussed above are constantly on the radar of this group, which continues to look for better ways to manage the risks associated with a contractor’s snow and ice management operations.
Robert Kennaley practices construction law in Toronto and Simcoe. He speaks and writes regularly across North America.  He can be reached for comment at 416- 368-2522, or at kennaley@mclauchlin.ca. This material is for information purposes and is not intended to provide legal advice in relation to any particular fact situation.  Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.