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Q: A resident trips and falls on your sidewalk, which is in the process of being replaced. He injures his back and shoulder, racking up nearly $100,000 in medical bills. The resident files a lawsuit, alleging the construction site was not properly marked or roped off. Who's liable for the damages, you or the contractor? 

A: You might guess (and hope) that your contractor is liable, but the answer is "it depends." It all hinges on whether your contract was properly executed.

In the actual case above—a $4 million lawsuit—both the property owner (an HAI Group policyholder) and the contractor was at fault, HAI Group attempted to tender the claim to the contractor, which means the contractor would handle the claim under its own insurance policy. The contractor refused, which wasn't surprising given that the contract's indemnity provision wasn't entirely favorable to the property owner. The case went to mediation, where HAI Group's defense counsel and claims handler argued, with some success, that the contractor should bear all liability.

The case settled, and the property owner was required to pay $75,000 of the $250,000 award. That's far less than the $4 million the plaintiff demanded, but it could have gone even better for the property owner if the contract had been executed properly.

Bottom Line: Contracts are negotiable. To ensure they're written in your favor and properly executed, have your legal counsel review them before you sign.

If the boxes in this construction contract had been checked, the outcome of this case might have been very different.