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Contractors & Insurance: Managing Risk

By February 7, 2018 February 14th, 2019 Blog, Business Protection

Whether you are hiring a construction contractor, landscaper or snow removal service, property owners and property managers should protect themselves from the liability risk when hiring outside help.

Community associations can be held responsible for incidents caused by a contractor even though they may have no direct fault.

Make sure the contractor you hire has adequate insurance coverage and obtain a full copy of their insurance policy.  Your insurance broker should review the policy to see if there are endorsements or exclusions that should be removed or added such as height restriction exclusions, third party over exclusion or contractual liability.

Another important step in managing the risk should involve a written and signed contract that clearly specifies the duties of each party.  Within the terms of the agreement, it should state how the property owner and contractor will allocate or transfer risk through the purchase of insurance.  The contract should ensure that the contractor, and not the property owner, is held responsible for losses that arise out of the contractor’s work on the property, also known as a hold harmless agreement.  It should be required that the property owner and property manager be listed as an additional insured under the contractor’s insurance policies.  The same holds true even if an owner is hiring a contractor to work in their unit.  The contract should also indicate what insurance policies the contractor is required to maintain, along with minimum limits.  Most associations focus on General Liability only, but additional insurance may be necessary.  For example:

  • The coverage should also include Workers Compensation with employer’s liability limits
  • Automobile Insurance should be included if vehicles are involved
  • Commercial Umbrella provides excess coverage on General Liability, Workers Compensation, and Auto Liability limits in case the award is greater than coverages of the underlying insurance

All contracts should be drafted and reviewed by a qualified attorney before signing.

Lastly, before work commences, a certificate of insurance should be obtained. The certificate should name the Additional Insureds. Certificates should only be relied upon after your broker reviews the contractor’s insurance policy along with the applicable insurance sections of the contract.

In any event, avoid providing contractors with tools, ladders, equipment or safety devices. Doing so may leave you liable for an accident that involves the use of equipment.  Allow the contractor to maintain control of their work.

Mackoul Risk Solutions offers Mackoul School trainings for more information on how you can protect your association.  If you are planning to hire contractors and have any questions about how to manage your risk, please contact us.