When you are responsible fiscally for your own business, there are constant risks to navigate, protecting your investment. In a landscaping business, sometimes this includes direct risks such as equipment breakdowns or downtimes related to bad weather. Sometimes this is a third-party risk.
Third-party risk is the potential threat posed against your business by an individual or organization involved in a financial transaction without being one of the principals. In this case, third-party risks are risks generated by the clients you provide services for.
Risk management, especially third-party risk control, is essential to protecting your business, minimizing the negative consequences of such risks.
When it comes to third-party risks, there are three areas where potential risks may arise. Clients may exhibit dissatisfaction with your work. Clients may claim property damage incurred from you or your employees, or clients may claim personal injury related to services rendered or negligence stemming from work completed.
- Dissatisfaction with work
In a case such as this, you or your employees complete a job thinking it was done the way you and the client had agreed upon. Perhaps, due to a miscommunication, there is a discrepancy between how it was executed and what the client wanted, and the client is upset. Maybe shrubs were not trimmed the way they prefer, or the grass was mowed too short or left too long.
While the discrepancy comes down to a miscommunication between the client and yourself, it’s still concerning. Depending upon their dissatisfaction, they could speak negatively of your business to friends and neighbors, discouraging those they know from hiring you or even influencing current customers from discontinuing a business relationship.
- Property damage
Sometimes accidents happen, but if you or one of your employees is the cause, the onus falls upon your company. Perhaps an employee is mowing and unintentionally hits a sprinkler head, damaging the system, but the property owner never disclosed sprinklers. Maybe you are mowing, and your mower runs over debris in the yard left by the homeowner, and material is thrown into the siding, cracking it.
In both cases, some responsibility should fall to the homeowner, but chances are, your landscaping business will be held accountable for repairing the damage.
- Personal injury
This type of personal injury occurs in relation to work that is completed or negligence related to the job. A couple of examples include: homeowners go out into the yard after chemical applications — fertilizers, weed killers, or pesticides — before they should enter the area; equipment is accidentally left on the job site by landscaping employees and homeowners, their children, or pets accidentally come up it and get injured, requiring medical attention.
How to minimize these risks
Undoubtedly, preventing or minimizing third-party risks is the most effective way to protect your business from third-party liability issues. It isn’t possible to completely negate the risks through prevention, but the following strategies will help significantly.
Clear, descriptive contracts
One of the most effective ways to minimize a client’s dissatisfaction with the work and services provided is to create and agree to a clear, descriptive contract before any work initiates. While verbal agreements are friendly, it’s best to have a written agreement in place to protect both parties involved.
A well-written landscaping contract includes a detailed description of all work to be provided to the client, when services are carried out (mowing schedule, fertilizer applications, weed treatment frequency, etc.), payment arrangement, and performance guarantees. Depending upon the client, it may also include details surrounding sprinkler maintenance and special services to be completed at the start and end of the season.
Keeping track of equipment
To minimize personal injury related to equipment accidentally left on a job site, it is critical to keep a watchful eye on all equipment and hand tools when you or your employees are working.
- When working with tools, never set them down in the grass or flower beds. Always make sure to set them in a place where they are easily visible, or instead of setting them down someplace on the property, take them directly to the work truck once they aren’t needed.
- Stay alert and never leaves tools unattended, even for a short time.
- Check the job site after the job is completed before leaving to make sure nothing was unintentionally left behind.
Communication with clients
Keeping open lines of communication will significantly help to reduce third-party risks.
- To secure client satisfaction, communicate if service dates/times need to be rescheduled due to weather or other unforeseen events.
- To minimize personal injury risks, tell the client about any chemicals applied to their lawn and what safety measures they need to follow after application (i.e., how long to stay off the grass).
Most importantly, document, document, document all of the communication — having proof of communication works in your favor if the client raises an issue, saying services weren’t done appropriately or negligence occurred.
Lastly, making sure your employees are adequately trained on basic company protocols, the risks mentioned above, and ways to minimize incidents will help significantly reduce potential liability. Training can be in person or completed online.
Sometimes, no matter how hard you try to prevent or minimize third party risks, situations arise that places the liability solely upon your business. To help protect you in this unforeseen event it’s essential to carry general liability insurance (GL), commonly known as business liability insurance for your company.
General liability insurance helps protect your business from customer claims of property damage or personal injury. It can help pay for repair costs, medical expenses, legal fees, and judgments or settlements should they be awarded.