Contracted Services: Best Practices for Human Service Organizations- Philadelphia Insurance Companies

Non-Profit Contracting Tips

The basic function of human service organizations is to provide a service or to meet a need for individuals in the communities they serve. Service agreements or contracts will dictate the expectations and responsibilities of these services. These contracts can also increase a human service organization's liability and risk, so they warrant close review and understanding.

Services contracted or being contracted

The landscape for many human service organizations is changing, with individual clients and governmental entities asking for new or updated services. To meet these changing needs, organizations are broadening their capabilities or contracting with other organizations to fulfill that new need. Either way, the new services could bring on additional liability risk, which should be carefully evaluated from an operational and insurance risk standpoint. An example is the growth of host homes. Instead of using group homes, owned and managed by the organization, host homes have grown as a solution to take on the servicing of individuals with developmental disabilities, similar to a foster care arrangement. Additional questions that this arrangement now poses include:

  • What role does the organization play?
  • Are they a contractor (with the state) and then subcontract responsibilities to the host home?
  • What is the organization's duty to pre-qualify the host home?
  • What is the organization's duty to oversee and monitor the host home?
  • Does the state maintain any oversight or do they delegate that to the organization?

Contract wording

Since contracts are legal agreements, it is critical that human service organizations understand the details of their contracts. These fine points need to meet their expectations and be acceptable from a liability standpoint. As services expand or change, new contracts should be thoroughly reviewed for key points such as:

  • Is the scope of services in line with the organization's understanding?
  • Is the indemnification language fair?
  • What does the dispute resolution stipulate?

A PHLY insured recently dealt with new contract wording when a state asked them to expand their services. The state offered a contract that required the organization to indemnify the state for work that was outside of the organization's control. The organization realized this and chose to say no to the contract rather than take on that additional liability burden. The state agreed to make the wording fair to both parties, and the organization ultimately signed a contract for expanded service in that state.

Additional resources

Human service organizations should review all contracts from operational, legal, and insurance risk standpoints, regardless of whether they are providing the service or are subcontracting it to another organization.PHLY Smart Contracting is a guidance document to help walk you through the key points in a contract and ways to protect yourself. In addition, human service organizations should turn to their legal counsel, insurance agents, and PHLY risk management for additional assistance. If you have any questions, please feel free to reach out to PHLY Risk Management Services at or 1.800.873.4552 #4.

IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this E-Brochure is for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

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