Plug All Possible Holes in Your Licensing Agreement

Every five years in New York City, the facades of residential buildings taller than six stories must be inspected and repaired as part of the Department of Buildings’ Facade Inspection and Safety Program (formerly known as Local Law 11). While the facade is undergoing repairs, the owner of the building is legally required to ensure that all neighboring properties within 20 feet of the facade work are protected from falling debris. As such, cooperative and condominium boards and their property managers are regularly fielding access requests from neighbors looking for permission to come onto their property to set up protective measures. So what is the most important thing for boards and property managers to do when that happens? The answer is simple: Have a written license agreement setting forth the insurance and indemnity requirements of both the neighbor requesting the access as well as the contractor(s) that the neighbor is hiring to do the work.

Let’s assume Building A is undergoing facade repairs and must access the property of Building B to set up protective measures. The board or property manager for Building B should insist upon a written license agreement with Building A, and the license agreement should require both Building A and its contractors to defend, indemnify and hold harmless Building B from any claims arising from personal injuries or property damage. The agreement should also provide Building B and its property manager with additional insured coverage under the policies maintained by Building A and its contractors. 

It is critical that Building A’s contractors also sign the license agreement — contractually binding them to provide insurance and indemnity to Building B — or, in the alternative, they can execute a separate insurance and indemnification agreement with Building B. It is also critical that Building A and its contractors provide certificates of insurance and a primary commercial general liability policy. 

Because contractors are typically working on many buildings at once, the agreement should also require that the contractor’s insurance ensures that the full limits of its insurance will protect Building B. That way, Building B won’t get caught in a situation where the contractor’s insurance will not be available because it has been exhausted by claims on its other jobs. 

Finally, the agreement should specify that the insurance carried by Building A and its contractors will be primary, meaning that Building B’s insurance would not need to provide any coverage until all of the insurance for Building A and its contractors has been exhausted.

Before signing the license agreement and insurance and indemnification agreement, Building B’s insurance broker should review the certificate of insurance and the policies to ensure that the limits of liability are acceptable and do not include any amendments or riders that would exclude coverage for Building B. Critically, the broker should check whether the insurance policies exclude coverage for claims against Building B for absolute liability under New York’s Labor Law (for example, where the contractor’s employee falls off a sidewalk shed erected on Building B’s property). 

The task of the team of professionals representing the interests of Building B is to limit as much as possible the potential for Building B’s insurance having to provide coverage in the event of a loss arising from Building A’s work. Additionally, if the necessary protective measures require Building A to access a terrace or roof area that is for the exclusive use of a specific shareholder or unit-owner in Building B, then the board or property manager should also require that Building A and its contractor include the owner as an additional insured and as a party to be indemnified, which will protect Building B against a claim by a shareholder or unit-owner if the terrace, roof or other property located there is damaged.

Scott S. Greenspun is a principal at the law firm Braverman Greenspun. Jillian Menna is general counsel for Genatt V Insurance Solutions.