Guest Columns

Limiting your contractual liability

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Betty Norman, BSN, MBA, CPHRM
Betty Norman, BSN, MBA, CPHRM

Contract review allows you to evaluate potential risk exposures and ensure that you limit your liability when working with third parties. Establishment of a contract review program begins with the development of written policies and procedures.

A policy in a long-term care facility should specify that all contracts and agreements with third-parties working for your organization be put into writing and submitted to some type of formal review process.

Contracts with significant financial exposure should be reviewed by counsel and signed off by an officer or administrator. Contractors should be requested to provide appropriate coverage limits of at least $1,000,000 combined single limits.

Written policy should outline the process for maintenance of contracts. Original contracts should be kept in a central location (often in the finance office), in a locked, fireproof cabinet. Written policy should indicate who has access to the file. A system should be in place to review all contracts on an annual basis. Current certificates of insurance should be maintained for all contractors. Expired or terminated contracts should be maintained for a defined period of time, as indicated in policy.

Contracts with third parties that will provide patient care services on behalf of your organization have additional issues that should be addressed. Some of these include requirements for background screening, responsibility for education/training, and performance evaluation. Evidence of insurance coverage for health, workers compensation and liability insurance should be obtained.

Self-Assessment for Contractual Liability:

  • Do all contracts include standard language that has been reviewed and approved by legal counsel?

  • Are all contracts reviewed and assessed based on defined criteria?

  • Is there a policy designating signatory authority?

  • Is there a requirement that any changes to a contract be put in writing?

  • Is there a requirement that the contracting party carry insurance to protect against workers compensation or disability claims, general liability claims, professional liability claims arising from the provision of services, or failure to provide a service?

  • Is there a requirement that organization be an additional named insured on the contractor's policy?

  • Is there a requirement that the contractor carry minimum acceptable limits of liability?

  • Is there a requirement that a certificate of insurance be provided (and current COIs maintained)?

  • Is there an internal system to ensure that appropriate certificates of insurance are obtained before work under the contract begins?

  • Is there a requirement that all contracts include hold harmless/indemnification clauses? (A hold harmless clause is meant to hold your organization NOT liable for causes of action or judgments arising out of services performed by independent contractors/providers.)

  • Is there a systematic process for centralizing all contracts and ensuring periodic review?

  • Is there a periodic review of the standard contract, as changes in state/ local or federal legislation occur?

By asking these questions, you have a better chance of limiting liability related to contracts.

Betty Norman, BSN, MBA, CPHRM, is Risk Control Director at Glatfelter Healthcare Practice, part of Glatfelter Program Managers, a strategic business unit dedicated to Glatfelter Insurance Group's program business.

Guest Columns

Guest columns are written by long-term care industry experts, ranging from academics and thought leaders to administrators and CEOs.