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Risk transfer is risky business

By: Chris Thompson//February 26, 2010//

Risk transfer is risky business

By: Chris Thompson//February 26, 2010//

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By Chris Thompson

“Risk transfer” sounds like the desperate wish of a distracted driver the instant before he rear-ends the car in front of him.

In the construction industry, it’s the desperate position of the contractors at the bottom of the project pecking order.

On contracts with risk transfer clauses, some unlucky subcontractor is going to draw the short straw and, essentially, assume responsibility for any lawsuit-worthy error on the project. It doesn’t matter if that sub had anything to do with the mistake or accident.

It’s one of the most counterintuitive, unfair policies in the industry.

Accepting responsibility should not be a choice. Integrity is defined by more than the wording in a contract.

And yet subcontractors who have fought for years to abolish risk transfer still find themselves on the hook for the mistakes of others.

But those subs now have a state senator on their side. Lena Taylor, D-Milwaukee, introduced a bill that would void provisions in construction contracts that require one company protect or insure another company.

The contractors faced with losing their risk advantage argue the proposed change would just gum up a simple system. It would lead to more lawsuits and confusion.

Simple, they say, is better — nevermind what’s fair — and the law should be left alone.

That sounds like the desperate wish of contractors the instant before they’re kicked out of the driver’s seat.

Chris Thompson is the editor of The Daily Reporter. He takes blame for other’s mistakes on a daily basis.


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