Outside Risks: Who's Transferring Theirs to You?

By: Eileen Lesberg
Date: 9/1/2007

With competition for business hot within the staffing industry, many firms are willing to do anything it takes to get that assignment. Lower rates, special servicing, and contracts assuming all risks associated with placements have become routine.

Some firms will even assume client risks when signing contracts.

During the soft market in recent years, many insurance carriers, in order to gain more market share, broadened the coverage they offered at the request of their policyholders. Similarly, staffing firms were requesting - in some cases demanding - broadened coverage - to gain more clients. This was good news for the staffing industry - or was it?Were the broadened coverage terms more than you bargained for?

When a staffing firm assumes the responsibilities of another, they might not be aware of the dramatic implications this assumption of risk may have on your insurance policies, and even their business. A transfer of risk clause in a client agreement could be a hotbed of loss exposure for their company.

A transfer of risk clause means just that-risk is transferred from one party to another. Often times the contracts prepared by your clients are intended to transfer their risk (or liability) to the staffing firm. This transfer of risk could cost you dearly.

Suppose a temporary worker loses an arm while operating a machine at a client location. The client had not properly maintained the machine. Your temp worker collects workers' comp through the staffing firm policy, but sues the client for bodily injury. Your client expects the staffing firm's insurance policy to respond-or to defend and indemnify. But what did you as a staffing firm do wrong? Was it your responsibility to have client equipment maintained? Can you control what your client does, or more importantly, doesn't do?

There was no negligence on the part of the temporary worker or the staffing firm. The accident resulted solely from the negligence of the client. But, if the staffing firm has added the client as an additional insured or signed a waiver of subrogation, or assumed the responsibility for their clients' actions or inactions through other contractual wording, ALL responsibility may ultimately reside with them. Why assume the risk for something you can't control?

Be sure when you sign a contract you are completely aware of the risk you are agreeing to assume, and how your insurance will respond. Ultimately, it may be a cost that you have to pay.

Eileen Lesberg is the Chairman of World Wide Specialty Programs. She can be contacted at 516.248.5000, or visit www.worldwidespecialtyprograms.com.