Emily Myers in Bricks & Bucks on September 20, 2023
At the Future, a 165-unit condominium in Kips Bay, resident manager Marat Olfir recently spotted a suspicious certificate of insurance (COI) provided by a contractor planning to install blinds in a unit-owner’s apartment. A fake COI could leave the building at risk for damages of hundreds of thousands of dollars.
The first red flag was a mismatch between the broker’s name and the contact details. Insurance brokers generate COIs on a computer, but after printing out the document, Olfir also noticed the check marks looked handwritten.
“I thought, there’s no way an insurance broker will do such a thing,” Olfir says. “So that led me to further investigations.”
When work is done in a co-op or condo, whether it’s a minor alteration or major renovation, the building is liable for damages if the contractor’s insurance is inadequate. Proof of insurance is documented in the certificate of insurance, but that in itself is not enough to avoid liability if there is an accident.
In order to protect your co-op or condo from the consequences of New York’s one-of-a-kind Scaffold Law, every contractor working in your building must also provide a work agreement stating the contractor’s name and the type of work planned. The contract must also state that the building, the board, and the managing agent will be indemnified and held harmless in the event of an accident. The parties should also be named as additional insureds on the contractor's general liability policy.
Olfir’s misgivings about the COI prompted him to call and email the insurance broker. “Usually if you call the broker in business hours, you can get through, or if you send an email you might get an out-of-office response,” Olfir says. “I didn’t get any response.”
When he called the insurance carrier listed on the COI, he was told the policy had expired months ago. His hunch was right. The document was fake.
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There are other red flags when you review a COI. Many buildings, including the Future, request the COI be emailed directly from the insurance broker. “Now when the contractor emails the insurance, right away that tells me something is fishy,” Olfir says. He also looks for inconsistencies in fonts and character sizes on the COI, which could suggest that someone with copy-and-paste skills but limited insurance expertise prepared the document.
It typically falls to the property management team to review COIs. Gustavo Rusconi, vice president and director of management at Argo Real Estate, makes sure each building's insurance broker reviews the COI. This practice extends to smaller jobs, such as appliance deliveries or minor alterations, if something doesn’t look right. “We immediately get the building’s insurance broker involved to double-check,” he says. Rusconi also maintains a list of insurance carriers with a history of denying claims.
Failure to spot a fake COI can be financially devastating. “They will look to sue the person with the deepest pockets, which is going to be the building owner,” says Cheryl Fitzpatrick, director of operations at the insurance brokerage Mackoul Risk Solutions.
Best practice when reviewing a COI is to give your insurance broker enough time to look at it together with the declarations page as well as a copy of the full insurance policy. It’s a time-consuming administrative task, but Fitzpatrick says she seldom reviews just the COI. “The COI tells me they have coverage,” she says, “but it’s not telling me whether there’s a height exclusion, an injury-to-employee exclusion or a sub-contractor warranty that could negate coverage for the building.”
When Olfir uncovered the fake COI, he gave the unit-owner the option of signing a waiver accepting full liability if the company went ahead with the work. The apartment owner chose not to sign it. The fraudulent COI has been reported to the state Attorney General.
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