Property managers assume that when a contractor provides a certificate of insurance, they’ve done their job. Unfortunately, in New York, especially in construction-related injury claims, that assumption can turn into a very expensive mistake.
Recently, we handled a claim involving an alleged employee injury on a New York City construction project. The contractor carried proper insurance. The certificate looked fine. Yet when the claim was tendered, the contractor’s insurer refused to defend the building or the managing agent. The building’s own insurance was forced to step in.
The reason? The underlying contracts were never properly vetted. Here’s what went wrong:
• The agreement with the contractor was never signed
• The building was not named anywhere in the contract
• No executed written agreement required the contractor to name the building as an additional insured
• When an employee injury was alleged, the contractor’s carrier declined to respond
From the carrier’s perspective, this wasn’t a coverage “gap.” It was a contractual failure. In New York, most contractor policies only extend additional insured coverage when there is a written, executed contract that explicitly requires it. Courts and insurers increasingly enforce this requirement strictly, particularly in employee injury and Labor Law-type claims. In this case, there was no signed contract, the building was never specifically identified as an additional insured, and the insurer argued there was no contractual privity requiring coverage. As a result, the contractor’s insurer took the position that it owed coverage only to its own insured, not to the building. That left the building’s insurance policy as the first and only line of defense.
From an operational standpoint, this outcome feels unfair. The contractor had insurance. The injury came from the contractor’s work. Yet the claim still landed on the building. For property managers, the consequences are real – loss history on the building’s policy, potential premium increases, higher deductibles, increased scrutiny from carriers at renewal, and friction with ownership questioning why their policy responded. None of this turns on whether the contractor “meant” to provide coverage. Insurance responds to paper, not intentions.
This scenario highlights a common misconception: that a certificate of insurance can substitute for proper contract execution. It cannot. Certificates do not create coverage, override policy language, establish additional insured status, or replace a signed agreement. When a claim arises, insurers look beyond the certificate and go directly to the policy and, if one exists, the contract.
In New York City, employee construction injury claims are especially aggressive. Owners and managing agents are routinely named in lawsuits, even when they had no direct involvement in the work. When risk transfer fails due to missing or defective contracts, the building has little protection. Insurers rely heavily on strict contractual compliance to determine who ultimately bears the loss.
This claim was avoidable. A properly executed contract, naming the correct building entity and clearly requiring additional insured coverage, would have dramatically changed the outcome. For property managers, the lesson is simple but critical: no signed contract + no named building = no risk transfer. Insurance should always be reviewed before work begins, not after a claim surfaces. Once an accident happens, it’s too late to fix the paperwork.
Property managers don’t need to be insurance experts, but they do need a process. Contract vetting isn’t administrative busywork; it’s claim prevention. Because when the contracts fail, the building’s insurance becomes the insurer of last resort, whether it should have been or not. Check out our Contractor Review department, and reach out to us with questions anytime.
