A Certificate of Insurance Is Not Enough Protection

What’s the first thing a co-op or condo board should do when it gets ready to tackle a major capital project?

The most important thing they should address is their building’s insurance. That means providing your broker with a copy of the proposals for any improvements or renovations that you’re planning. The broker can check the building’s insurance policies and the contractor’s insurance policies to make sure there are no major policy exclusions where liability would be put onto the building owner or the condo or co-op board. In addition, there should be indemnification agreements to make sure that all of that is in place in the contract.

A lot of boards think that if the contractor has a certificate of insurance, everything’s OK. But that’s not the case, is it?

That’s not the case. Unfortunately, a lot of times the certificate only says so much. You do need a policy endorsement from the contractor, showing that you’re named as an additional insured. You should also check that the indemnification language essentially holds the building harmless for any losses that do occur. It’s also important to review the policy itself to make sure there are no policy exclusions that put the liability onto the building owner. 

Is it correct to assume that a lot of these exclusions are driven by New York State’s one-of-a-kind Scaffold Law? It states that if a worker is injured in a fall caused by gravity, the owner of the building is automatically at fault. Is that what’s driving these changes in the insurance policies?

Yes, 100%. The Scaffold Law is actually the biggest issue, I believe, that New York real estate is dealing with right now. The claims coming in range from six figures to seven figures. It’s pretty incredible how large they can be, and they’re easily avoidable if you contact your insurance broker, just to have a quick look at what’s going on, make sure that something like that can’t occur.

There was a story recently about a roofer that had an insurance contract where his workers were covered — provided they were standing on the ground when they were injured. Are there certain exclusions in these policies that boards need to be aware of?

Yes. It’s funny you mentioned the roofer exclusion because I actually came across an issue similar to that. It was an insurance policy that included a contractor that was performing roofing work, and there was a height exclusion — roofing work with a height exclusion! There’s no coverage there if anything happens above a certain height. So that’s a big, big issue.

What’s the best way for boards to make sure that a contractor does not have these exclusions in that insurance policy?

The best way to do that is to have your broker thoroughly review the policy and the exclusions on the policy. These policies can range into dozens and dozens of pages, and that’s why you need professionals to do the work and dig into it. They can tell you what they have issues with and what is problematic. From there you can make the proper adjustments so that you are properly protected.

Jonathan Steward is a vice president of the O&S Insurance Brokerage Group.