Co-op buildings routinely require contractors to provide a Certificate of Insurance before any work is started either in a building or for individual shareholders. The managing agent or the shareholder will usually provide a list to the contractor of certain parties they want named as "additional insureds" in the general liability policy for the project, such as the co-op corporation, the managing agent and the shareholder, if work is being done in an apartment. Typically the contractor will fax that list to their broker and ask that a certificate be issued listing those named parties as additional insureds, exactly as the client has asked for them to be listed. The contractor will then furnish a Certificate of Insurance to the client or the managing agent. There may be one or more names listed to cover the owner's interests i.e., different entities that are involved with the project. What most people do not realize is that even though the contractor delivers this certificate before the work has begun, as he is required to, the parties still cannot be confident that they have coverage until an event occurs that "tests" the coverage.
Beware of Grey Areas
Everything goes back to the policy itself and what the policy says about what triggers coverage and what is covered and what is excluded. There are also many "grey" areas that arise during a project where coverage is not clear. When we talk about situations where an employee of a contractor is hurt, that is usually an event that is excluded from general liability coverage under the contractor's policy. This is because employees of the contractor who are injured on the job are covered under the workers' compensation policy.
When an injured workman sues the owner of the property where he was injured i.e., the contractor's client—it is common for that party to implead or sue the contractor in a third-party lawsuit. The client is, in effect saying, "If I'm found liable, the contractor should pay, because he was the one who did the work." In those situations, the general liability carrier will not tender a defense for the contractor, but the workers' compensation carrier will. The co-op building will probably not be covered under that policy and will have to rely on its own policy.
Then there are other situations where it is a third party who is injured and sues the contractor, the owner and others. This is the most common scenario where the carrier will defend the contractor. What about defending the client who is named as an additional insured on the Certificate of Insurance? That is where it gets to be a little trickier. Even though the client may have that Certificate of Insurance in hand, there still may not be coverage afforded. The policy itself may have an endorsement that says something to the effect that there must be a written contract between the contractor and the client requiring coverage or there will not be any coverage. The signed contract triggers the insurance coverage, and there may not be a signed contract.
Another issue that often arises is whether the type of work being done is covered. A general contractor may submit a Certificate of Insurance, which is accepted by the managing agent. A flood occurs. It may turn out that the general contractor's policy is for carpentry work, but the work that caused the damage is from plumbing. If the plumber, for some reason, does not have insurance, that work will not be insured under the general contractor's policy. None of this will come to the surface until there is some damage.