Contingent liability, claims from the negligence of a third party, are rising and one of the most important current issues in insurance. Determining that a contractor is properly insured will protect your condo association from unexpected costs and headaches if damage is caused on your property or that of a neighboring association.
Contractors are heavily regulated, with most jurisdictions requiring insurance and bonding to become licensed. Because of the administrative burden and cost some contractors choose to work illegally – these laborers can cause extreme liability for their clients.
Issues of Properly Completing Work
Contractor (also called Performance and Surety) Bonds protect the client against faulty or unfinished work. If a plumber disappears mid-job or is unable to finish a project to satisfaction, the bond he is required to carry will pay to complete the work. Most licensed professions are required to carry a bond in each city they are licensed. Asking for a performance bond on a small job is infeasible; however they are standard on larger jobs. If a contractor is requiring payment upfront for a sizable portion of the end bill a bond should be required.
Issues of Damage to Property
Contractors can cause damage to condominium building under construction, the contents of an individual unit, neighboring buildings and nearby automobiles. General Liability Insurance provides coverage for these types of events.
Issues of Bodily Injury
Injury from construction debris or faulty work can be expensive to litigate and settle, a contractors General Liability Insurance will cover these claims. The association should request to be named as an additional insured on the general liability policy. As an addition insured the association will be provided coverage if they are sued over something the contractor did, protecting your assets and insurance policy.
Injury to Workers
Injuries on the job are costly and common in construction. Because of this, workers compensation insurance can be extremely expensive. Workers compensation laws assign liability for uninsured contractors. If the association hires an uninsured contractor and someone is hurt on the job, the association can be held liable. If the association does not carry it’s own workers compensation the claim will likely be uninsured.
All carriers should be AM Best A- VII or better, those below this threshold are at serious risk of not paying claims.
General Liability – $1M with Association Named as Additional Insured
Automobile Liability – $1M
Workers Compensation – Statutory Limits with $1M/$1M/$1M Employers Liability
Surety Bonds – Specific to Job Value