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Beware of Uninsured/Under-insured Painters and Contractors

Saturday, July 31, 2010

Beware of Uninsured/Under-insured Painters and Contractors

Liability Insurance

Recently I was estimating a job for a potential client who’s newly renovated home was flooded by a faulty heating system.  It needed plaster repair and painting.  There was no insurance money from the General Contractor who was likely going bankrupt over the issue.  How did this happen?  The homeowner had a copy of the insurance certificate from the contractor in their files.  The certificate had the contractors name on it and was dated a couple of months before the job started and was valid for the year.  That’s good enough, right?

Wrong - the policy had been cancelled by the contractor before the job had even started!

If you live in a well managed condo, you know the insurance “drill”.  You can’t even get your painter or contractor in the door without current insurance certificates naming yourself, the condo association and the management company “additional insured”.  Your management company is protecting you by ensuring that the contractors policy is in force by getting a current certificate.   Getting your name on the certificate increases the probability that you will be notified in the case of cancellation.  Depending on the your exact circumstances naming you as certificate holder or additional insured can have other benefits as well, especially in New York State where liability laws are different than elsewhere.

Worker’s Compensation

I was recently on a website for a contractor that is not a competitor and does not service our area.  On his insurance page it says something like this:

WORKER’S COMPENSATION: In accordance with state law, since our company is owner operated and we technically have no employees we are not required to carry workers compensation insurance. 

Maybe you haven’t seen it in writing before but you may have heard it verbally.  “My company is exempt from worker’s compensation”  Do you believe it?  There are very narrow exemptions for Worker’s Compensation coverage in New York, they are that all the people working on the job are owners (principals) of the company.  Unless there is a single person on your job, how are you going to prove that?  In fact even 1099 employees (subcontractors) hired by your contractor must often be covered. The New York State Workers’ Compensation Website specifically says that tax status does not determine the need for a company to insure their workers.

On another page of the same painter's website are customer letters thanking all four members of the above contractor’s crew for a job well done!

Thank goodness nobody got hurt!

You worked hard for your assets, a little caution goes a long way in protecting them.  If you own your own home, we suggest you ask for both Worker's Compensation and Liability Insurance certificates made out in your name with a current date and the expiration date.  If your contractor is not protecting you and his workers, what else is he skimping on?  

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