Most jobs require the contractor or subcontractor to provide an insurance certificate and add the owner or General Contractor as an additional insured. This is a normal procedure in the event of an accident on a job site.
It is common practice that as you go up the ladder from a subcontractor to a General Contractor to an owner, the guy on the bottom gets an insurance policy mainly for the guys on top as “additional insureds.” Once the owner gets a certificate from the General Contractor that the owner is an “additional insured” or the General Contractor gets a certificate from the subcontractor, everybody rests “easy.”
The endorsement, however, must be carefully analyzed. The endorsement might limit liability and protect only those who have a contractual obligation with the named insured. In other words, the subcontract between the General Contractor and the subcontractor requires the subcontractor to obtain a certificate naming the owner, who he does not have a contract with, as an additional insured. However, the owner might not be covered by the insurance policy.
Remember, insurance companies love being paid premiums. However, if they can find a way not to pay a claim, they will jump at it.
Similarly, the work performed might not be covered, there might be extras that would not come within the purview of the endorsement. Also, certain laborers may not be covered under the policy. The insurance policy may not cover the work the subcontractor is actually performing. Recently, an insurance company disclaimed coverage for an owner where the insurance policy provided for chimney sweeping and not actual construction work even though the contractor was paying premiums for construction work.
The subcontractor might also use architects, engineers, experts in its work that might be the cause of a claim. Endorsements might not cover those contingencies. The bottom line is to know the policy, know the endorsement, be wary of any possibilities that a sneaky insurance company might use as a defense against any claims. Everyone wants to pay less for insurance.
However, sometimes the policy is worthless because of all the exclusions. You may be paying the insurance company premiums for a policy that does not protect you. It is vital you know what your insurance policy includes and incorporates when purchasing it. Simply having insurance may not be sufficient. In the past, we have been retained to defend claims because the insurance company rejected coverage due to the language in the policy. As a result, the contractor was obligated to pay its own legal fees to defend the case and ultimately settle it using its own funds.
Never let your lien time run out!
For a free copy of a pamphlet pertaining to mechanic’s liens and payment bond claims, kindly contact me.
