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This article provides an overview of risk transfer agreements you should have in place to help avoid damaging lawsuits.

Imagine you are the owner of a shopping center that is occupied by multiple tenants, and you just had a new roof installed on your shopping center. One week after the construction is completed, the new roof collapses. When you arrive at the scene, you discover that your tenants have customers who were injured in the collapse. Who is responsible for the collapse? Who will pay for the injuries and medical bills of the injured? Who will compensate your tenants while the building is being repaired? How will you afford the costs of defending yourself if lawsuits are filed?

Regardless of the size of your business or property, questions of liability can arise when a contractor installs a product or performs services on your behalf, which then results in an injury or property damage. These questions can also come up when a contractor’s employee is injured on your premises. Liability should ideally lie with the party that has the most control over the hazards and exposures of the potential liability.

One way to avoid confusion about liability is to set up a contract with your contractors and/or sub-contractors, where they agree to assume the risk. These contractor/sub-contractor parties can include vendors, suppliers, installers, lease arrangements, maintenance providers, and others. Transferring risk is a strategy that involves contractually shifting risk from one party to another.

Nationwide Loss Control Services can provide common issues to be considered when developing a contractual risk transfer policy.

For more on contractual risk transfer, see the following Nationwide Loss Control Services Materials:

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