Spotlight on: Verifying a Contractor's Workers' Compensation Coverage
Nov. 11, 2014 — New York laws place absolute liability on landlords in cases of accidents. Therefore, co-op shareholders, condo unit-owners and boards of both types of buildings need to be absolutely sure that contractors they hire have proper insurance coverage.
Any apartment-owner hiring a contractor must complete an alteration or a decorating agreement and have it signed by the board. And a contractor must provide a certificate of comprehensive personal liability and property damage insurance policies from its insurance carriers, generally in the amount of $1 million, that name the shareholder, the co-op or condo and the managing agents as additional insured.
The contractor and any subcontractors also need to show they have workmen's compensation insurance coverage for their employees. The contractor should sign a "hold harmless" agreement that states he has read the terms of the agreement and agrees to indemnify the shareholder and co-op.
By the Book
Proper protection starts with choosing the right contractor. When distributing alteration or decorating agreements to your shareholders, inform them that any contractor doing work in their apartments must be licensed as a home improvement contractor by the New York City Department of Consumer Affairs. You can check for a license at the DCA's website.
Although hiring a licensed contractor goes not guarantee quality work, the DCA does pay consumers who get cheated by unscrupulous licensed contractors through a trust it set up. The board can put together an informal list of contractors who have done reputable work based on the recommendations of the shareholders, but should make it clear that the list in no way endorses anyone.
Verify Those Bona Fides
If the contractor has the proper insurance coverage, he should be able to provide the shareholder or unit-owner with the correct certificates. Get phone numbers for the contractors' insurance carriers, and make sure somebody verifies that the contractor truly has an active policy. Run these certificates by the property manager, who should be able to recognize a questionable carrier or whether there's something missing in the certificate.
Workers in any for-profit company must be covered by their employer's workers' compensation coverage and should be able to provide a certificate as proof. Sole proprietors and businesses with no employees, however, are not required to have workers' comp. They are, however, required to have liability insurance.
Some apartment-owners may feel that hiring a contractor shouldn't warrant a lot of extra paperwork and phone calls, but they must remember that any work being done in an apartment is a potential risk to the co-op. The building must have everything in order to protect itself. The message to homeowners and boards is: "Don't take even minor alterations lightly."
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Adapted from "Workmen's Comp: Slip Sliding Away" by Michael Gwertzman (Habitat, March 2004)