Certificates of Insurance- A must for all of us

Are you doing any remodeling, repair, or service work at your home? Has your real estate agent suggested some work be done to better market your home? Have they suggested some contractors to provide these services? If you’re buying or selling a home, have you enlisted the services of a home inspection company? Your landscaper that mows and takes care of your lawn also attaches a snow plow to the front of the pickup truck to plow your driveway or parking lot during the winter months.

When it comes to contractors and subcontractors the construction contract rules the day. A contracting firm hiring subcontractors will attempt to protect its financial interests by using the contract to transfer as many responsibilities concerning a job to the subcontractor as possible. While the concept of transfer is good, in practice there are may be many problems arise from this transfer. What about the individual hiring the contractor? What does the contract for services say? Be aware, many of the terms and conditions found within the construction contract may not be insurable items. Simply put, you may, by signing the contract, be agreeing to assume liabilities that far exceed those that you should. So as a word of caution, always check with your attorney and insurance agent before signing a contract! Construction contracts not only line out the responsibilities of each party to the contract but all seem to have a specific section dedicated to insurance requirements. It’s in this section where you will find requirements as to the limits of insurance required, the types of insurance required and any special treatment such as naming of additional insureds, waivers of subrogation, special coverage requirements and cancellation notification clause modifications. If you have been presented with a construction contract and asked to sign be sure to check with your attorney and insurance agent to make sure it is in your best interest to sign the contract.

What is a Valid Certificate of Insurance:

The entity seeking proof of coverage, which could be the individual homeowner or a contractor providing services to the homeowner, as outlined in a construction contract, should never rely solely upon the insurance certificate as valid evidence of workers compensation coverage. Certificates are very clear and all contain a disclaimer stating “this certificate is issued as a matter of information only and confers no rights upon the certificate holder.” It also states “this certificate does not amend, extend or alter the coverage afforded by the policies below.” If the general contractor is requesting some form of protection under the subcontractors policy then the subcontractors policy must be modified by endorsement. This is the only way coverage can be amended. Possession of a certificate does not confer coverage and without the endorsed policy no modification requests are complete. People do strange things when it comes to certificates. We’ve seen fraudulent certificates used where a contractor may have had a copy of his cert from before, whites out the dates, changes them to make them current then changes the certificate holder and presents the certificate as valid. We’ve heard of certificates being produced and sold on the internet. Our opinion, certificates should only come from the producing agent, agency or company.

Contractors and Workers Compensation:

From a workers’ compensation perspective the general rule is that all workers on a job site will be covered by workers compensation. The question becomes whose workers are they? If you are the homeowner, primary or general contractor who hires a contractor or subcontractor to perform work you must verify that the contractor or subcontractor has workers comp coverage for his employees, it’s your only protection. If the subcontractor does not provide workers comp coverage then you are responsible for injuries sustained on your property or if you are a contractor hiring sub contractors, your workers comp policy will step in and provide coverage for any of the sub’s injured workers. The effect is that those claims will cause lawsuits against the homeowner or increase the contractor’s experience modification factor causing the workers compensation premiums to increase.

In conclusion, if you are the homeowners having work done, always ask for a certificate of insurance from the contractor hired to do the work especially if it will be an ongoing project such as the landscaper turned snow plower.  Requesting this certificate from their insurance company is of no cost to them, so refusal to present one, showing an out dated one, or obviously one that has been altered is your first red flag.  You may be getting what you paid for!  For all of my real estate agent and brokers, do not recommend any contractor to perform work or even give estimates to your clients unless you know they have the proper insurance in place for what they do.  As insurance agents, not only are we aware of these certificates and how they work, we owe a fiduciary duty to our clients to recommend they obtain one from contractors they use and provide one for our insured contractors and explain the coverages and limitations to them.  Mistakes in these areas for both insurance agents and real estate agent/brokers could result in serious errors and omissions lawsuits.