Jon Kolbrener in Board Operations on April 23, 2013
First, you should make sure that your homeowners policy and the building's commercial general liability policy provide coverage for losses that occur while construction is under way. Speak with your broker.
Second, the construction contracts should provide that the general contractor and subcontractors will indemnify, to the fullest extent permitted by law, the shareholder, board, building and managing agent for all losses. At the same time, the contracts must require the contractors to secure general liability insurance for their company, as well as the shareholder, board, building and managing agent. A primary policy with a $1 million limit, and an excess policy with a $5 million limit, are recommended. Here, it should be kept in mind that it is the severity of the injury, not the size of the job, that will determine the amount of insurance coverage necessary to afford adequate protection.
Double Down Indemnity
If the contracts do not require the procurement of insurance, the indemnity agreement may not be enforceable. Thus, the insurance procurement provision should not be omitted under any circumstances.
The actual insurance policies should be produced before the work begins. Often, contractors will provide certificates of insurance. However, these are not proof of coverage in New York City and its surrounding counties. Thus, if a broker incorrectly issues a certificate of insurance, but the insurance policy is not issued, the insurance company would not be obligated to provide coverage.
Third, the alteration agreement should provide protection to the co-op. It should obligate the shareholder to indemnify the building, board and managing agent for all losses, to the fullest extent permitted by law. It should also require the resident to name the building and board on the resident's insurance policy. Here, too, the failure to include the obligation to secure insurance may invalidate the indemnity clause.
Jonathan Kolbrener is a partner at the law firm Braverman Greenspun.
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