Contractors Putting You at Risk! When Insufficient Insurance Makes You Liable
Jan. 10, 2013 — Where there's work, there are accidents. And where there are accidents, there are lawsuits. In one case, a contractor had insurance to cover himself while working on buildings six stories and lower. The problem? The building he was working on was eight stories. Elsewhere, a contractor was doing façade work — a risky job that carries a high insurance premium — but told his insurer he was a low-risk and low-premium-paying carpenter. In yet another case, a contractor had insurance but the policy specifically excluded accidents that happened because of construction activity.
"It happens all over the place, all the time, and it's only getting worse as contractors are clawing their way, trying to stay in business," says attorney James Samson, a partner at Samson, Fink & Dubow.
"This is a huge problem and it comes up on a daily basis," says Ed Mackoul, president of Mackoul & Associates, an insurance brokerage firm that provides insurance to co-ops and condos. "The main reason is that in New York labor laws are so strict."
Reviews Required
The bottom line is that condominium and co-op boards should have their attorney and/or their insurance agent review the actual policy. Among the areas to consider:
Correct coverage. Samson says a condo or co-op board should make sure that the insurance policy makes sense — is it the right coverage?
Subcontractor coverage. Check to see that all subcontractors either have their own policies or are covered under the main contractor's policy.
Indemnification. The contractor should indemnify the condo or co-op and the managing agent. With façade work there should be a clause that specifically indemnifies them for Labor Law 240, a law that creates liability for building owners that vastly exceeds other potential defendants when workers are on elevated platforms. That means that any worker injured on the job or anyone else injured in the process of the job can make a claim against the building, the association, or the managing agent, but that contractor's insurance will cover the defense and any possible judgment or settlement.
Sufficient insurance. Samson says many contractors don't carry enough insurance. He says policies routinely offer $1 million in liability coverage, an amount he called "absurdly low." If the injured worker gets a judgment for $2 million, the worker will look to the building to make up the difference.
Additional insureds. The policy should also indicate that any subcontractors, managing agents, and co-op or condo associations used for the job are listed as "additional insureds," says attorney Steven Sladkus, a partner at Wolf Haldenstein Adler Freeman & Herz.
But, there are loopholes. To learn what that they are, see part 2 of this article.
For more, see our Site Map or join our Archive >>