Outsourcing specialized work to a professional or a business that provides services is a common operational solution. Instead of hiring one or more employees to manage key tasks, the organization relies on an outside business to issue paychecks, develop a website or even physically maintain the premises.
Especially in cases involving safety-critical services or services that might involve private consumer information, partnering with a service provider who has all necessary state licensing and appropriate insurance is of the utmost importance for organizational protection. Some parties intentionally misrepresent their credentials to obtain contracts.
What options do business leaders have when they learn that a service provider does not have the credentials and financial protection they claimed to possess?
Litigation may be necessary
In some cases, a lack of credentials or insurance may only come to light after an incident occurs. If an outside party attempts to file an insurance claim or files a formal complaint with state regulators, the investigation process may uncover the fact that a service provider contracted by a company did not have mandatory state licenses or adequate insurance. Legal action can often protect an organization by holding a service provider who misrepresented their circumstances directly responsible.
Ideally, the agreement signed with the service provider includes details about professional expectations, including the need to maintain specific licenses or carry a minimum amount of professional insurance. Without a contract requiring baseline protections and certifications, communications or advertisements holding the service provider out as licensed and/or insured could support the claim that they engaged in fraud to secure a contract.
Business leaders frustrated by manipulative and deceptive service provider tactics may need help assessing the situation and responding effectively. The guidance of a business law attorney can make it easier to hold service providers accountable for verifiable misconduct or breaches of contract.