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December 1, 2023

Contractor Liability Tips and Protections

It's a simple reality that unexpected things can happen in the world of contracting and construction, and one term that it's vital for contractors to be aware of here is liability. Both contractors and clients alike need to know how to protect themselves in this area, and in the case of contractors, this means being fully familiar with your state and local guidelines so you know when liability may or may not be yours for a given issue.

At Contractors School, we're here to help contractors around Utah with all their needs, from starting a business to managing an existing contracting company and more. Let's look at all the general factors contractors need to be aware of when it comes to liability while on the job, including how to protect yourself and your company.

Contracts Are Vital

There are several reasons why contracts are a must for contractors, with liability being one of the most important. A well-written contract should be detailed and specific, outlining all aspects of the project including materials used, timelines, expectations, payment terms, and more. Having a signed contract in place can help protect both parties in case any issues arise during or after the project.

There are several specific clauses that should be included in a contract to address liability, such as indemnification clauses, hold harmless clauses, and insurance requirements. These will outline who is responsible for any damages or issues that may occur during the project and ensure that all parties have the necessary insurance coverage in case of accidents or injuries.

State and Local Guidelines

As mentioned before, it's crucial for contractors to be familiar with their state and local guidelines when it comes to liability. These regulations will vary from location to location, so it's important to do thorough research and stay up-to-date on any changes or updates. In Utah, for example, contractors are required to have general liability insurance of at least $100,000 for each incident, and $300,000 total.

Furthermore, you should also be aware of any specific regulations or laws that pertain to your particular type of contracting work. For example, electrical contractors may have different liability requirements than general contractors.

Proper Insurance Coverage

Having the right insurance coverage is essential for protecting yourself and your business from liability issues. In addition to general liability insurance, contractors should also consider professional liability insurance, which covers any errors or omissions made during the course of a project. Workers' compensation insurance is also necessary to cover any on-site injuries to workers.

It's important to regularly review and update your insurance coverage as needed, especially when taking on new projects or expanding your business. Make sure you have adequate coverage for the type of work you do and that all policies are renewed and in good standing.

Warranties and Implied Warranties

Another major aspect of liability for contractors is warranties, both express and implied. Express warranties are explicitly stated in the contract and cover specific aspects of the project, such as materials or workmanship. Implied warranties, on the other hand, are not explicitly stated but are assumed to be part of the contract under state laws.

It's important for contractors to fully understand any warranties included in their contracts and to fulfill them as promised. Failure to do so could result in potential liability issues.

Statutes of Limitation

As you're likely aware, there are time limits for filing lawsuits known as statutes of limitation. These can vary depending on the type of lawsuit and the state in which it is filed.

By understanding these limitations and keeping accurate records and documentation, contractors can protect themselves from liability issues that may arise after a project is completed. It's important to keep all records for at least the duration of the statute of limitations, which can range from 3-10 years depending on the state and type of project.

Strict Definitions

Finally, one overarching theme we wanted to really drive home is the importance of strict definitions in contracts and documents related to liability. Vague or ambiguous language can leave contractors vulnerable to interpretation and potential liability issues. Be sure to clearly define all terms, expectations, and responsibilities to protect yourself from any misunderstandings or misinterpretations.

Understanding liability as a contractor is crucial for protecting yourself, your business, and your clients. By following state and local guidelines, having proper insurance coverage, using detailed contracts, and staying informed about the latest regulations and laws, you can minimize your liability risk and focus on successfully completing projects for satisfied clients.

At Contractors School, we provide support and resources for contractors in Utah and beyond, so you can confidently navigate the world of contracting. Contact us today to learn more about our courses and services!

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