General Liability and Workman's comp

My co-op needs general liability and workmans comp and they want themselves to be put as additional insureds. The contractor says it’s $3000.00 extra to put them as additional insureds. The work is tiling the floors and walls of two bathrooms. No plumbing work. Is the $3000 quote for insurance alone is reasonable? The estimate for the labor and contractor’s materials is $10000.00 so $3000 is only for getting the insurance. Any ideas?

The contractor should have its own GL and comp. The charge for an additional insured endorsement is generally about $20, and certainly no more then $100.

Your coop board, their lawyer, architect, and manager are wrong.  They think your contractor wants the work and if they don’t, you will find others who do.  They assume there is a shortage of work or a balance of supply and demand.  Also, insurance is available to “good” Home Improvement Contractors (HIC), who are simply willing to pay for it.  Both assumptions are wrong. 1\. There is no shortage of work.  Coop shareholders, where proof of insurance is required, are at a disadvantage in competition for skilled labor. Large coops and condos require proof of insurance, whereas rental landlords, apartments in small self-managed buildings, and free standing homes do not.  Insurance is expensive.  Labor rates for licensed, insured and tax-paying HIC’s are about 40% higher than for others. HIC’s without a license are under threat of severe legal penalties.  Their contracts are not binding.  Yet, the license requires comp insurance.  Home owners are not required to hire licensed HIC’s.  Only 1,400 HIC’s are licensed.  Neither the Dept of Consumer Affairs, nor NYC City Counsel Consumer Affairs Committee Chair, Daniel Garodnick, knows how many are unlicensed.  The vast majority are not.  I think about 95% of HIC’s operate without either liability or comp or both.  Is the “friend of your super” who works in your building?  I doubt it.   A NYS Dept of Labor auditor refused to look at my financial statements because he said, “everybody in your industry cheats.”  I think more HIC’s are deducting payroll taxes and filing returns, than are insured. Clients, who do not require proof of insurance, often hire unlicensed, uninsured contractors.  This holds prices down in the entire pool of clients, despite the shortage of service providers.  This is not fair to legally-operating contractors.  Some coops require proof of insurance even for painters.  Why would a good painter, paying workers in cash, increase expenses and complications for these few clients when there is plenty of work where no insurance is required?  The same logic applies to other trades. 2\. Becoming insured is determined by the contractor’s independent will to pay for it. Actually, insurance companies don’t want to do business with home improvement contractors, especially small ones.  Many clients do not want to pay the outrageous rates of insurance companies who are reluctantly-willing to provide insurance.  Unless home owners who don’t require insurance are forced to pay for it, than coop shareholders or their HIC’s will bear disproportionately higher insurance costs. Liability is voluntary, but my carrier hasn’t taken new clients for years.  It is hard to collect only a few hundred or even several thousand dollars after a legal judgment, from a contractor who does not have liability insurance.  Lawyers generally don’t take the case unless the contractor is insured, or the judgment is large, so there is little incentive for small contractors to carry liability.  If you are having trouble with your contractor, you may turn to the department of Consumer Affairs, but than, if your contractor is both uninsured and unlicensed, they may not be of much help either. Workers’ Compensation Insurance is required by NYS law, but it costs double or more than for new construction.  Yep, according to the NY State Senate Insurance Committee, “Carpentry Not Otherwise Classified” in homes with C of O’s is twice as risky as work on roofs or scaffoldings of multi-story towers under construction (licensed by the NYC DOB, not DCA)  Even if the HIC hires a licensed and insured plumber, and the HIC’s actual trades (tiling, installing cabinets or wall board) are classified and rated far less risky, as a political matter, your contractor (and coop shareholders) are required to subsidize new construction. Every body wants to cut costs.  I have written on this topic in this forum before, and testified in City Council.  When I appeared before the Consumer Affairs Committee I was one of 4 witnesses called.  All of us were licensed HIC’s.  Not one representative from any coop board appeared.  Not one representative from any kind of real estate association appeared.  Not one consumer of any kind testified.  None agreed or disagreed that this unfair and unjust system should be changed, but every contractor said it should be changed.  One more thing, after the DCA testified, they left.  They did not even bother to stay and hear what contractors had to say.  Thank you for reading this.  You are being treated unfairly.  What would you like to change about our system of insurance and consumer protection?  Do you think owners of private homes should pay more?  Should comp rates on new construction go up and renovators down?  Workers’ comp is full of injustice, but what do you want to do about it?  Should the DCA stop licensing HIC’s and hand the mess over to the DBA?  Should home owners be required to hire licensed HIC’s? You may contact me through the directory under Tile – Green Mountain.  Or reply here.

When a contractor is hired by a co op board they are required to submit a Certificate of Insurance that shows the insurance coverage that the contrator carries. To “Additionally Insure” the client is a standard procedure especially with co op boards and should not be an issue if the contractor is insured. Sometimes there is a small fee for this request but not always. If the contractor is asking for $3000 for the coverage the contractor may not have the insurance and is looking for the co op board to absorb the cost.

You should require confirmation from underwriting that the policy has actually been endorsed. COI’s are issued by the insured’s broker, and occasionally (far too often) are rejected by liability insurers for various reasons, or the requests are never even transmitted due to the broker’s negligence. This then becomes an E&O issue should a liability claim be made, as courts do not recognize COI’s as proof of insurance, in part because they contain a standard disclaimer in the upper right hand corner warning the certificate holder that the certificate has been issued for information purposes only, and partly because certificates are not issued by the insurer but rather by the broker, whom is generally deemed to be an agent of the insured and not the insurer. It is very good practice to therefore insist on receiving undewriting confirmation before the work starts to protect yourself and other shareholders. Also, some liability insurers like to use manuscript additional-insured endorsements that confer very narrow coverage. Insist on an ISO CG 2010 or equivalent “broad form” endorsement covering all liability “arising out of” of the named insured’s work.

Our (small, self-managed) co-op has this requirement. We’ve been here 7 years, and we, our neighbors individually, and the co-op collectively have had many jobs, large and small, in that time, and I’ve never had a single contractor of any kind ask for a separate fee for the “additional insured” endorsement. I suspect, as someone commented above, that the contractor you’re talking to doesn’t already have insurance, so is needing to shell out for the entire policies. Unless you’re really dying to work with this person, I’d probably suggest you look for someone else. (Also, is it just me, or does $10K sound a bit high for just tiling work? Unless they’re 2 really big bathrooms with really complicated tiling…?)