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What is Contractual Risk Transfer?

By Brett Findlay | Vice President, Business Risk Specialist
In New York State, contractual risk transfer (CRT) is a critical and perhaps most significant component to a contractor’s risk management program. Contractual risk transfer is a non-insurance contract or agreement between two parties whereby one agrees to indemnify and hold another party harmless for specified actions, inactions, injuries or damages. As such, the costs associated with CRT are indirect and unseen to a company until a claim arises. Having a broker and agent team with the expertise to provide sound CRT advice is the final secret in your arsenal of tools to reduce the cost of risk for your company. Although it will ultimately be your attorney who should finalize your contractual wording, your agent should be able to work hand-in-hand with your risk management team in order to properly protect your assets and interests.
For example, if you, as the prime contractor on a project, do not require the proper wording from your sub-contractor, you leave yourself exposed to the possibility of crippling labor law claims. Ensuring that you have proper policy terms and conditions as well as requiring complete and accurate contract language, including your subcontractor having a policy to match what the contract calls for, are essential to protecting your interests.
There are also direct-cost savings opportunities with your insurance program that stem entirely from your CRT. If an underwriter is given an example of your subcontractor agreement, as well as executed contracts, they may feel much more protected in writing your insurance. That underwriter, in having an extended level of comfort with your CRT, may be more inclined to work harder on your behalf. Finally, you and your agent should review your policies at least on an annual basis to make sure they meet any and all contractual requirements for protecting your assets should a claim ever make its’ way to a courtroom.
Brett Findlay, ARM, CRIS
Vice President, Business Risk Specialist
315-280-6376
BFindlay@OneGroup.com

Published: February 2022
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