Insurance Needed When Working with Contractors

Insurance Needed When Working with Contractors

A contractor is a person or a company that is a separate business entity hired to complete a task or tasks that the current staff is unable to accomplish. Contractor insurance provides coverage for persons coming onto a property to perform work. Many properties have set limits that contractors must meet.

• Comprehensive General Liability Insurance
• Automobile and Non-Owned Automobile Insurance
• Workers Compensation Insurance

A Certificate of Insurance is a document issued by an insurer that evidences that an insurance policy exists and gives the insurer, insurance agency, insured, types of insurance, policy numbers, effective dates, limits, certificate holder, cancellation procedure, special provisions (e.g., additional insured), and the name of the representative who authorizes the certificate to be issued.

A property manager should request Certificates of Insurance from contractors. The Certificate of Insurance is proof that the contractor has insurance and the property is not exposed to loss from any negligence on the part of the contractor who provides services for the property.

Only original Certificates of Insurance or copies faxed from the insurance agents’ or the insurance company’s office should be accepted. Photocopied certificates or ones that appear to have been altered are not acceptable. 

The property manager and the property owner should be named as additional insureds on the certificate with respect to their management and ownership of the property. An additional insured is a person, other than the named insured, who is protected by the terms of the policy. Property managers and building owners often ask to be named as additional insureds, and are asked to include others as one, for liability purposes. The limits of liability should be included on the certificate and the amounts should be sufficient. At least one limit of liability should be indicated for each type of insurance.

The property manager must check the certificates for the following items:

• Signature of the issuing agent or insurance company
• Notification to the property manager and the property owner if a policy is cancelled or lapses due to non-payment
• Name of the appropriate insurance companies or insurance agents
• Type of insurance coverage
• Effective dates of the insurance policy (it must be current)

Coverage that a property manager should look for from an owner on a certificate includes the following:

• “All Risk” property insurance
• Windstorm insurance
• Commercial General Liability
• Rents insurance
• Workers’ Compensation
• Flood insurance, if applicable

Click here to see a sample certificate of insurance.

Indemnity Clause

In general, indemnity may be defined as the obligation resting on one party to make good a loss or damage another party has incurred. Most contracts with contractors have an indemnity clause. Tenant lease agreements may also include indemnity clauses. These clauses should be read carefully as they state who is to be held harmless from damages or injuries occurring on the property.

Sample Indemnification Clause
"Contractor shall indemnify and hold harmless Owner, its partners and employees from and against all costs, damages, claims, liabilities and expenses (including reasonable attorney’s fees) suffered by or claimed against Owner or any of its partners, agents, licensees and employees to the extent arising from the gross negligence or willful misconduct of Contractor, its sub-contractors or employees at the Property and/or in conjunction with Contractor’s performance of the work contracted for herein."