To Plow or Not to Plow?
Although, to the average person, this would seem to be an easy decision, there are many factors including some hidden consequences in which every contractor should be aware of before making the decision to engage in snow plowing activity.
Brian Scrocca, a partner and practice leader at Cook Maran & Associates, a regional insurance firm, sees this all too often. “Snow removal contracts place most of the responsibility on the contractor, to the extent they are signing over everything but their first born child,” Scrocca explains. “Insurance companies have seen enough of this to begin using standard exclusions in their policies. It’s critical to have an insurance adviser who not only understands the proper insurance coverage for the work, but also can explain the indemnification and hold harmless language the contractor is agreeing to in these contracts.”
One of the biggest factors that must be considered is how the snow plowing activities will affect the contractor’s insurance premiums for General Liability and Workers Compensation. Often times, by engaging in snow plowing activities, the workers compensation insurance premiums for contractors will be drastically affected, especially for smaller contractors; however, the larger spike will typically come in through an increased premium for general liability. In many cases, the contract will force contractors to sign over the keys to their homes and cars or the custody of their children. OK, not the last one but you get the point. Many of the claims which begin to pile up are the result of the damage the contractor causes to property it was plowing or for subsequent slip and fall claims. Brian Scrocca, account executive for commercial insurance at the Cook Maran Insurance agency knows firsthand how many contractors insurance premiums are effected by engaging in snow plowing activities.
Another consideration for contractors stems from the fixed hourly rates that may be outlined in the snow plowing contract. In many cases, prior to a forecasted storm occurring, the customers contract may require the contractor to be on stand by which means onsite and waiting to begin plowing. The problem with being placed on stand-by is what could happen if the storm occurs over the weekend. Many employees may be entitled to additional pay such as time and half or double time depending on the hours worked or days worked. Time and time again the weather man is wrong and it could result in the company having to pay its employees to be on standby at a rate higher than its employer can recoup under the contract.
As mentioned earlier, the thought of “idle” equipment to many contractors seems to be a waste of money however one must also consider the additional wear and tear which is placed on the equipment by utilizing it during the harsh winter months which often leads to much larger future expenses.
The decision to snow plow may be an easier decision for larger contractors as they may not need the cash flow during the winter if their company produced well during its busy season however most smaller contractors are not in as good of position and have to take on this work in order to get through the winter months. Before jumping into this revenue producing activity, contractors should make sure to take the time and make an investment by doing the following:
- Sit with your insurance agent who can review historical claims and rate adjustments with you
- Have the equipment manager prepare an analysis on historical repairs and maintenance to the equipment used in snow plowing activities
- Sit with your attorney to review the snow plowing contracts to ensure there is adequate risks being shared by all parties
Strategize with your accountant to find alternative winter revenue streams or winter cost saving measures so as to avoid the temptations of snow plowing unless there are the numbers make sense for doing such.
Ask Our Experts
The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.
