Why Is an Insurance Company Liable For the Actions of Contractors?
Many insurance companies, including Old Republic Home Insurance, work with independent contractors. The insurance company sends these professionals to the insured’s home to repair the effects of:
- Fires
- Floods
- Breakdowns
However, if a contractor behaves unprofessionally or causes damage, the customer loses confidence in the insurance system itself. Although insurers claim that they are not liable for the actions of third parties, practice shows otherwise. If a company selects a contractor without due diligence and ignores obvious risks, it can be held liable for negligence.
What is Negligent Hiring?
Under California civil law, negligent hiring occurs when a company fails to exercise due diligence. Even though it had a duty to do so. For example, if the contractor:
- Did not have a valid license
- Had complaints
- Had a criminal record
But was hired to do the work anyway. Recent cases, such as Doe v. Uber Technologies, Inc. for damages caused by performers when they fail to provide the proper screening process. This applies not only to transportation services, but also to the insurance industry.
How Does This Relate to The Shear Economy?
The platform economy model assumes that large companies only act as intermediaries between performers and customers. Such an arrangement is convenient and reduces costs. But it creates a legal vacuum.
Old Republic Home Insurance, by contracting with contractors, cannot absolve itself of its duty to vet them. This is confirmed by materials published by Cornell Law School which states that negligent screening is an independent cause of action.
When Is a Company Truly Liable?
In order to prove the insurance company’s liability, the injured person must prove that:
- The company had a duty to protect the customer’s interests
- It breached that duty by allowing a substandard contractor to perform the work
- It caused direct damage
- The damage was a foreseeable consequence of that breach.
For example, if a contractor damaged electrical wiring that caused a fire, a claim could be made against the insurance company. Citing negligent supervision and lack of proper inspection.
What Should Injured Clients Do?
If you have been injured by a contractor referred by Old Republic Home Insurance, you should contact an attorney immediately. He or she will help you to:
- Document your damages
- Obtain documents proving the contractor’s connection to the company
- File a claim for negligence
- Seek compensation.
In addition to going to court, clients are advised to file complaints with the California Department of Insurance. Which regulates insurance companies.
What Arguments Does the Defense Typically Use?
Insurance company representatives often rely on the fact that contractors act independently. However, this in no way relieves them of liability. If the company itself selected the contractor and controlled the progress of the work. It is also important to note that companies can claim that the damage was caused by the client’s own fault.
However, practice shows that courts carefully examine the context:
- Whether there have been previous complaints against the contractor
- Whether the contractor was licensed, insured and qualified
If the insurance company knew of the risks but ignored them, it will be at fault.
What Should Insurance Companies Do?
To reduce the risk of lawsuits, insurance companies should:
- Set strict standards for contractor selection
- Strictly require valid licenses and insurance
- Review recalls and lawsuits against contractors
- Conduct a service quality review at least once a year, preferably twice a year
It is also advisable to include indemnification clauses in contracts with contractors. in the event of lawsuits related to their actions.
Case Law in California
There have been cases in California where courts have found insurance companies liable for the actions of substandard contractors. For example, in a Los Angeles case, a client was seriously injured when a ceiling repaired by a contractor collapsed. The court found that the insurer failed to verify that the contractor had a construction license and awarded more than $250,000 in damages.
This situation illustrates the importance of not only entering into a contract, but also being held accountable for its performance. Make sure contractors have the proper paperwork and licenses to protect other people from getting hurt. It is also important to realize that a contractor’s negligence may be the basis for a civil lawsuit. As discussed in the KAASS LAW article.
Conclusion
Old Republic Home Insurance, like other insurance companies, has a responsibility to protect its customers. Not just on paper, but in reality. Failure to properly vet the contractors it works with can result in:
- Loss of reputation
- Six-figure lawsuits
Victims should not face defenselessness or silence. Contact KAASS LAW if you have been in a similar situation where you have suffered because of an unlicensed contractor. Having evidence of negligence in hiring contractors can be an important factor in successfully recovering compensation.