Protect Yourself

One of the most important things you can do as a co-op or condo board member is to make sure that every contractor who sets foot on your property has a valid liability insurance policy.

Insurer Michael Spain, president of the Spain Agency and vice president of Brown & Brown of New York brokerage, says contractor and subcontractor insurance typically is the first line of defense when workers cause damage or suffer on-the-job injuries. If the insurance isn't inadequate, co-ops and condos may become the targets of multimillion-dollar claims.

Attorney James Samson, a partner at Samson Fink & Dubow, says co-op and condo boards should have their managers carefully screen contractor insurance policies to make sure they're current and adequate. "The superintendent should not let them into the building until the managing agent has seen the insurance policy and actually read it," Samson says.

It's also important to make sure contractors and subcontractors are doing the work for which they’re insured. For example, if they cause damage or are injured while working on the roof but they're insured only for indoor work, their insurance company may not pay an injury claim.

Samson recommends that boards also make sure that contractors who work in the units of individual building residents be required to carry liability insurance coverage.

While liability insurance is essential, it's also important to secure indemnification and hold-harmless agreements from all contractors, Spain says. "You want to know whoever you are contracting with is going to indemnify you," he adds. "We've seen a number of multimillion-dollar claims where someone gets injured and the building doesn't have the proper indemnification language." A large claim can cause a building's insurance to increase, and the residents will be required to foot the bill through common fees. "There are a lot of variables," Spain says. "It could be a 10 percent increase. It could be 50 percent. It's hard to predict."

If a co-op or condo is dropped by an insurer because it is considered to be at high risk for additional claims, a replacement policy could be significantly more expensive, Spain says. When setting a requirement for how much insurance contractors should be required to carry, some buildings ask for between $5 million and $10 million for large projects, he adds.

It's important to be aware that portions of the New York Labor Law allow injured workers to sue building owners and general contractors, even if they are not at fault for accidents. Co-ops and their boards are potentially liable under the law, says attorney Jonathan Kolbrener, a partner at Braverman Greenspun.

Fortunately, most co-op and condo boards understand the importance of avoiding liability exposure, says Elizabeth Heck, president and CEO at Greater New York Insurance Companies.

"It's one of those things you can never stress enough," she says. "If they don't have a proper contract with proper indemnification that is supported by insurance, they are very much exposed."