Builders and Remodelers:
Does that Insurance Certificate your Subcontractor Gave You Really Protect You?
By Steve Snyder, Attorney at Law
That Certificate of Liability Insurance your Subcontractor’s Insurance Company provided you may not cover your Company and the Insurance Company knows it (and they are hoping you don’t!)
I represent a lot of builders and remodelers and they all know that when they are hiring a subcontractor, they need the subcontractor to provide them with a “Certificate of Liability Insurance.” What they often do not know, and the insurance company does, is that the insurance certificate you were provided probably will not protect your company in the event you need to make a claim. Insurance companies do it all the time, and they do it on purpose. And if you don’t know what to look for, you could have a serious problem in the event you need to make a claim…with your subcontractor’s insurance company and with yours as well!
A client of mine in the roofing business had it happen to him and it has cost him tens of thousands in attorney fees and potential liability of close to $200,000.00 to pay for a mishap on the job site that should have been covered by his subcontractor’s insurance company.
The roofing company, we will call them ABC Roofing, signed a contract to put a new roof on a commercial building. ABC then contracted with a subcontractor to do the roof. ABC required the subcontractor to provide a Certificate of Liability Insurance, which they did, with ABC Roofing printed right on the bottom of the certificate under the heading “Certificate Holder.”
Both contractors were not aware that the roof on the building had leaked for years and the substructure was in bad shape. On the first day of work a section of the roof collapsed. Luckily, no one was injured or killed.
The owner of the building made a claim to his insurance company for nearly $200,000 to put a new roof on the building and remodel the inside of the building, claiming the work was necessary because of the damage caused by the roof collapse. Two years later, the Owner’s insurance company filed a suit against ABC to recover the money they paid to the Owner. Its what the insurance industry calls “subrogation.” They also named the Subcontractor in the suit but he was no longer in business.
ABC figured this would not be a problem because he had obtained a Certificate of Liability Insurance from the Subcontractor. However the Subcontractor’s insurance company declined the claim. The reason for their denial? The Certificate of Liability Insurance provided by the Subcontractor’s insurance company named ABC Roofing as a “CERTIFICATE HOLDER.” What the Certificate did not do was name ABC Roofing as an “additional insured.” Insurance companies do this all the time, hoping the contractor is unaware of the difference between a “certificate holder” and an “additional insured.” And often the contractor is not aware of the difference.
So, after being denied coverage by the subcontractor’s insurer, ABC went to his own insurance company, who he had been paying insurance premiums to for years. And guess what his insurance company told him? That’s right! They denied the claim because ABC was supposed to be covered by the Subcontractor’s insurance company.
If you want to know how the story ends, give me a call. But more importantly, if you have not talked to a lawyer who specializes in construction law, give me a call. I will be pleased to review all of your contracts and make sure you are protected. You can reach me at (717) 975-7799 or check out my web site at www.steveonyourside.com