Yesterday's Wall Street Journal article outlines a tragic elevator incident resulting in one fatality and several injuries. This event should spark the interest of all building owners to examine how their own "contractual risk management program" will be effective in insulating the Building Owner against such events. Many organizations have programs in place that purport to obtain indemnity and insurance from vendors but in practicality, it is often overlooked and almost never audited for compliance. When it comes to Elevator Maintenance Companies many attempts to provide a separate "Owners & Contractors Protective" policy (OCP) in lieu of extending their own coverage and affording the more traditional "additional insured" status.
There are a lot of arguments about what the best solution is, but the principle issue with an OCP policy is that it will not cover "completed operations" of the [Elevator Company] operations. A significant failing given that the most mishaps occur when the vendor is no longer on site.
Creating an effective contractual risk management program that is coupled with obtaining the proper evidence of insurance is a critical step in insulating the building owner from potential liability from an event, sometimes catastrophic.
Over the next few months, we’ll be talking more about Contractual Risk Management and (appropriate) Evidence of Insurance, what they mean and what it takes to have an effective contractual risk management program within your company. The ALS Group is the independent risk management consultant that focuses on helping companies lower their Total Cost of Risk (TCoR) and improve the best practices that are fundamental to risk transfer. If you have any questions, please don’t hesitate to contact me at 732.395.4251.