What Is Risk Management?

Elizabeth Heck,President and CEO
Greater New York Insurance

The Lay of the Land

It’s crucial that co-op and condo boards understand that having a sound risk-management program goes beyond having adequate insurance for the building. Having appropriate coverage is important, but it’s also important for boards to have procedures in place to protect against unintended claims.

The reason this is important is that New York is a very difficult jurisdiction for third-party claims and because of the state’s Labor Law. The law imposes strict liability on building owners, who can be brought into a lawsuit even when the building is not responsible. To properly protect the building, boards should make certain that any contractor performing work on the premises is properly insured and there is a contract in place that includes a hold-harmless provision in favor of the building. This will protect the building in the event a contractor, an employee of the contractor, or another party is injured while the work is under way.

Now What?

When there’s major work – like a hallway renovation or Local Law 11 facade repairs – most boards understand the need to have a good contract in place, but they may not realize that not all insurance is the same. The contractors’ insurance policies may contain limitations or exclusions for the work being performed at the building, which means those policies won’t respond in the event of a claim. So it’s very important to have someone knowledgeable – the building’s insurance broker, insurance carrier, attorney, or managing agent – review the contractors’ insurance policies before the work begins. This will ensure that coverage is available to protect the building from claims that may arise.