A Certificate of Liability Insurance is NOT Insurance

Sections 240 and 241 of the New York State Labor Law, commonly called the Scaffold Law, is the only law of its kind in the nation. Basically, the law says that if a contractor’s worker at a condo or co-op building is injured, particularly in a fall from a height, the building will be absolutely liable for that worker’s injuries. 

The law has huge implications and risks. Many boards are under the mistaken impression that they’re protected if they have a Certificate of Liability Insurance listing the building, management, and board as additional insureds on the contractor’s general liability policy. But the words in bold print at the top of this certificate say that the document itself transfers no rights or protections to persons or entities listed on the certificate. And it specifically says that “if the certificate holder is an additional insured, the policies of the contractor must be endorsed.” 

In order to protect your co-op or condo from the consequences of the Scaffold Law, every contractor that works in your building must provide you with several items. First, there is the Certificate of Liability Insurance, which by itself will not protect your housing corporation, but will be evidence that the contractor has the correct insurance policies in place (e.g. general liability, auto liability, etc.). Second, there is a work agreement stating the contractor’s name, the type of work to be done, the client or the building, and the building’s location. The agreement should state that the contractor agrees that the building, the board, and the managing agent will be indemnified and held harmless, and it should also state that the contractor will name all of these parties as additional insureds on its general liability policy. Finally, there is proof that the contractor has a workers’ compensation policy (sometimes, this coverage is referenced on the Certificate of Liability Insurance, but often, it is a separate document). Using a contractor without workers’ compensation insurance – even if the contractor is a sole proprietor, exempt for workers’ compensation requirements – can invite additional liability risk to your co-op or condo. 

Most boards rely on their managing agents to collect these documents. While a lot of managers say that they do this process well, in reality it’s very difficult to collect all of the documents for the contractors working at each and every managed building. And the risk in not doing it properly could be severe if a contractor’s employee is injured in a fall from a height and sues. Because of the Scaffold Law, that injured worker will win that lawsuit – even if he was drunk, high on drugs, or forgot his safety equipment, and broke all the rules. The building will still be liable under this law. The only way to protect yourself is either the building’s insurance or, ideally, the contractor’s insurance. And the only way you get coverage from the contractor’s insurance is to obtain a Certificate of Insurance, plus the agreement requiring that your condo or co-op is an additional insured. 

Jason C. Schiciano is president of the insurance brokerage Levitt-Fuirst Associates.