Sub standards

Features - Insurance/Liability

A strategic extension of many snow fighting teams, subs educated about risk can reduce your winter liability.

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August 13, 2012

Key points
  • If subs play a vital role in your operation, then they must be properly insured and adequately trained for their winter duties.
  • Subs represent your snow removal firm, so they must be aligned with industry standards and understand client expectations.
  • Insurance requirements will generally contain language that requires the sub to provide you with at least 30 days prior written notice before cancellation of coverage.
  • Maintain an organized subcontractor management system that tracks dates of insurance renewals along with a checklist for the premium audit.

In response to the ever-growing risk-management need in the professional snow and ice management industry, the discussion has begun to focus on subcontractors and the vital role they play in a snow fighter’s overall operational strategy.

A properly insured and trained sub becomes a tremendous asset to contractors and clients alike, most notably in the event of a large storm or multiple back-to-back storms, like the ones that occurred along the East Coast prior to last winter’s disappointment.

Look at the leaders in the snow industry and you’ll see the top organizations use subcontractors who can be depended on when needed to assist the company winter snow and ice management operations.

The industry standards finalized by the Accredited Snow Contractors Association (ASCA) emphasize proper training and using experienced subcontractors who can live up to the expectations you establish with your clients. Complying with the client’s contract and having your standards in place is the goal carried out by your subcontractor.


Sub agreements
Snow contractors must enforce a policy of using formal, written contracts that set forth the rights and responsibilities of the subcontractor relationship. Snow contractors must use written sub contracts knowing that many insurance policies could be limited to cover an agreement that is as-written. The contract should be signed by all parties before any work is started.

A proper subcontractor agreement should contain an effective and enforceable indemnification with a defense and hold-harmless provision that favors the top-tier contractor. If you are required by contract to hold your customer harmless, then the subcontractor hold-harmless provision should be in favor of you and your property-owner clients/property manager.

“Hold harmless and indemnification language is something that can play a huge impact once a slip-and-fall lawsuit is initiated,” says Joshua G. Ferguson, an attorney at Kent & McBride, P.C., in Philadelphia. “Further, it is one filled with legal terms and nuances whose impacts are too often noticed only once lawsuits arise. The most important thing for the indemnity – one who is owed the obligation from another – is to make sure that burden is properly shifted to the subcontractor performing the work.”


Insurance Requirements
A snow and ice management contractor who uses a subcontractor should verify a proper insurance policy which would pay for the damages covered under the subs policy. This will transfer some risk for the protection of their company and the client’s interest.

The following types of insurance should be requested on a certificate of insurance:

  • General liability
  • Commercial automobile
  • Worker’s compensation
  • Umbrella


Snow fighter Steven Jomides shares some of his key practices that help manage risk relating to subcontractors in his snow and ice management operations. Lawns by Yorkshire operates a snow and ice management business headquartered in New Jersey.

“We look to have their insurance policies mirror our levels of coverage,” Jomides says. “We prefer to have subs with similar coverage. We just don’t look at the certificate of insurance, we ask questions such as: does their policy contain exclusions that could affect us if there was a claim?”

A top-tier contractor should be specifically listed as “additional insured” on the subcontractor’s policy, using an appropriate endorsement. A statement indicating that the additional insured’s status will be primary and noncontributory over any other insurance you might have. Typically, a waiver of subrogation clause is used on the policies if the state allows for it.

The insurance requirements will generally contain language that requires the subcontractor to provide you with at least 30 days prior written notice before cancellation of any coverage. A clause that will reserve the right to withhold payment or remove the subcontractor from the job site for failing to provide the required proof of insurance may be used to enforce the requirement.


How insurance companies charge for subs
The rating basis for subcontractors is charged based on the total cost of the subs. In many ways the rate per $1,000 is generating minimum amount of premium to cover defense for the insurance carrier. Contractors should keep accurate records of the total cost of subcontracted work and, if possible, be specific to material and labor because how you pay your sub is how you will be charged in subcontractors rating basis.

Communication

Steven Jomides says solid communications is one of the most important aspects of Lawns by Yorkshire’s snow removal operations and how they interact with subcontractors.

“We expect 24/7 access and frequent updates from our subcontractors, which is the same workflow our mangers follow.” Jomides says. “In today’s world, it is easy to communicate in an efficient manner. Direct calls are an essential part, and we suggest that our managers follow up each call to the subcontractor with an email or text message. My managers type out a record of the call and submit it back to headquarters, which is attached to the client file. Our subcontractors will create their own summary of how the call went and send us a copy.”

Separate the total cost of subcontracted work by job and keep your records, including the certificate of insurance, with a copy of the written agreement. Being able to accurately and clearly determine the amount of subcontracted work can be the difference between a painful and smooth audit for insurance.


Documentation

A major theme in the ASCA’s Industry Standards is centered on documentation. The goal of your organization should be to make sure all client calls are properly documented and all conversation has an activity attached to the corresponding job file. Snow logs are date stamped, time stamped and details of the client request should be logged digitally to support any legal battle that occurs months after the job is completed.

ASCA standards require a member to advise the subcontractor of the client-specific contract terms. This can be implemented into the subcontractor agreement or explained at the preseason site-inspection meeting with the subcontractor.

Many contracts detail when and where to plow at a given location. Losses can be reduced if everyone knows exactly what is required. In addition, spot-checking plowed locations for work quality is a good idea. Also, be sure subs document any extra service requested by your clients outside the contract.

When it comes to documenting, enforce that the subcontractor working on your job keep the same level of documentation as your managers or employees.

Maintain a clean and organized subcontractor-management system that tracks dates of insurance renewals along with a checklist in a convenient place for the premium audit. At the time of an insurance audit, the insurance auditor will want to see all available certificates of insurance.

If your company uses an uninsured subcontractor or fails to show proof of insurance at the time of your insurance audit, the consequences could be higher premiums.

The moral of the subcontractor story, is be picky and make sure your organization is represented well when you contract with a sub.
 



How we do it


How long have you been using subcontractors?

Thirty years.

How many years of experience must your subcontractors have to work for you?

We don’t choose them based on experience. Our choice is based more on the equipment they bring. We prefer to bring in subs that have equipment over trucks for efficiency reasons, but us selecting them also depends on other things. We have area supervisors who work with and evaluate our subcontractors. We also choose subs through referrals and word-of-mouth. Sometimes we’ll take someone who just bought a plow and see what they can do. But if we do, we’ll pair them with someone who has experience and doesn’t mind training someone else.

Describe your preseason training regimen for your subcontractors.

We used to host a preseason kickoff dinner for our subs, but as we have gotten bigger, that has gotten harder to do. It’s more of a welcoming and communicating of our goals and some of the challenges we face.

What are the most important procedures in your company that you want your subs to follow?

The big key is the details. At the end of an event, the customer ultimately cares about what their lot looks like. Are the corner stalls back-drug out cleanly? Is snow piled on the islands – we hope not. Are there obstructions? Are there a lot of crumbs from windrows? Those are the calls we’ll receive and what a customer will key in on... unless we’re dealing with a crazy ice event. The devil is truly in the details of snow removal.

What kind of training do you do for subcontractors during the season?

If our supervisors see something that isn’t the way we like it, they’ll work with the subs to give them additional insights. But we’re somewhat bound by the difference between a contractor and employee. If we actually “trained” our subs, they would be considered employees, and that would increase our liability and responsibility for them. So we’re limited to giving them only a little direction. A lot of the time we’re dealing with companies that are very familiar with snow removal, so it definitely makes it easier.
 


How long have you been using subcontractors?

Twenty years.

How many years of experience must your subcontractors have to work for you?

We have two levels of subs: individual companies that own their own equipment (bucket loaders, skid steers, etc.), and people who own their own trucks. With us, you have to have at least 5 years of experience. Our average subcontractor has been working for us for at least 15 years, so they’ve either been trained by us or they already have the experience.

Describe your preseason training regimen for your subcontractors.

We kick off the season in November and talk about safety and courtesy, especially since the majority of our accounts are retail. We give them a highlighted checklist of safety items that are required by our insurance company. The second part of the training is, where we put the snow.

What are the most important procedures in your company that you want your subcontractors to follow?

We emphasize understanding the timing of a storm and being prepared. If you’re out till midnight or 1 a.m. waiting for a snowstorm, and you decide to try to grab a couple hours of sleep because it’s supposed to start at 3 a.m., that doesn’t cut it. We want to be out there two to three hours before the storm pre-salting some lots. Timing also includes routes. If you fall behind your route due to traffic, you can quickly get into big trouble.

What kind of training do you do for subcontractors during the season?

Most of our subs work in construction in the off-season, so once April or May hits, we typically don’t see them. Therefore, we try to do as much of our training as possible in November. Since most of our guys have 15 years of experience, it’s mostly book work. They know what to do automatically because of the repetitiveness of the job.

Do your subs just operate plow trucks, or are they also running salting trucks or heavy machinery?

We don’t hire individual people as subs. Most guys “1099,” but we don’t do that. If you’re a seasonal employee working for us, you have to have a minimum of 10 years of experience running a four-yard loader.

 

How long have you been using subcontractors?

Thirty years.

How many years of experience must your subs have to work for you?

It’s not always about the years. When you ask the subs the right questions in the interview, you can identify the right ones. We also take them to different sites and ask them, “How would you attack this job in a two- to six-inch storm?” Pretty quickly, you figure out whether they know what they’re doing. A sub saying, “I’ve been plowing for 20 years,” doesn’t necessarily cut it. We also look at their equipment and make sure they have all the state inspections and current liability/collision insurance. We also look at their availability. They can’t tell us, “I can only plow Saturday and Sunday because I have a regular job Monday through Friday.”

Describe your preseason training regimen for your subcontractors.

I try to do it one-on-one rather than in a group because it’s more effective. Some of our subs have been working for us for 10 years, so they don’t need training.

What are the most important procedures in your company that you want your subcontractors to follow?

They need to call us when they arrive at a site. Once they’re dispatched, they have an hour to get to the first job. After they’re finished with the job, they need to call us to say they’re done. This communication makes it easier for the office to route the (salting) trucks at the end of a storm. If their truck breaks down, they better call me right away. I don’t want them waiting for me to get to the job site to watch them repair the truck.

What kind of training do you do for subcontractors during the season?

We may have to re-emphasize the importance of communicating with us and getting time sheets in on a timely basis because we can’t do billing until we have them.

Do your subs just operate plow trucks, or are they also running salting trucks or heavy machinery?

It’s their equipment, so it comes down to knowing how to plow. If they do, we don’t have issues. If a guy has a Cat 928 loader for a big job, we may supply him with a 14-, 16- or 18-foot push blade depending on the lot.
 




For more

The Accredited Snow Contractors Association (ascaonline.com) has published its standards for professional snow and ice management industry. One of the ASCA’s education modules focuses on subcontractors, which is defined as anyone you hire, whether formally or informally, to perform work for you or on your behalf. Check out the ASCA website to access more information.


Matthew Peterson, CRIS, is a principal at Mills Insurance Group and a frequent Snow Magazine contributor.