My insured has recently decided to renovate her kitchen. She is concerned about hiring a contractor to do the work
because she has heard horror stories from friends and neighbors. One friend said the contractor he hired took his $20,000
and did about half the work — and put in about half the effort he should have — before running into financial problems,
leaving the renovations unfinished. Not only did her friend have to pay for the remainder of the work to be completed,
but he also had to pay to have the previous contractor’s work redone. I told her there is no coverage under her
homeowners policy; the contractor is hired at her own risk. Does she have other options?
Certificates of Insurance Your insured’s best bet is to make sure she hires a responsible contractor. Checking references should be a first step. She should check at least three. She should not pay for the entire job upfront. Typically, the contract will call for her to pay a portion upfront for materials and labor, then another portion as the work progresses, and a final payment when she accepts the completed project.
Your insured could ask the contractor for a certificate of insurance (COI) so she can be sure the contractor is covered by a commercial general liability policy (CGL) and workers compensation insurance.
Workers’ compensation insurance will pay for injuries to the contractor’s employees hurt in the course of doing the work. Otherwise, they would be more likely to sue your insured. As we have pointed out in another article in this issue of CSR Advisor, the CGL will not pay for poor workmanship, but it will pay for damage to other property due to the contractor’s negligence. Any responsible contractor will have both types of coverage.
A certificate of insurance is issued by or on behalf of the insurer. It is an informational document issued to a third party to show the type and amount of
Excess, Surplus & Specialty Lines Insurance
DeCotis Insurance Associates
Established in 1989
Liquor Liability Insurance
...DeCotis does that!
Important News
Effective August 28, 2010
all Massachusetts Liquor Licensees
will be required to provide proof of
Liquor Liability Insurance when renewing
or applying for a license.
The law requires an insurance policy for bodily injury
or death for a minimum amount of $250,000 of injury
to or death of 1 person, and $500,000 of any 1 accident
resulting in injury to or death of more than 1 person.
Are Your Clients Covered?
Options Available:
Package/GL including Liquor/Liquor Only
Providence, RI t: 401-351-0066
www.decotisinsurance.com
Braintree, MA
t: 781-794-1400
coverage the named insured has at the time that the certificate is issued.
COIs are commonly required by people who do work with construction contractors, but they do have limitations. COIs cannot modify coverage or change the terms of the insurance contract. They also do not offer a guarantee that the insurance policy will be in effect throughout the project term. The issuer of a COI is not required to let the person who requests the COI know if the policy has been cancelled or changed. This means that your insured could request and receive a COI at the project’s start, only to have the contractor or insurer terminate the policy after the COI is issued.
There are a few different types of contract bonds, but the one your insured would be interested in is the performance bond. This bond guarantees that the contract will be fulfilled according to her specifications.
Beauty Pageants • Camps • Company & Family Gatherings • Concerts •
. . . And Anything Els
In the event of a default, the performance bond obligates the surety to indemnify the owner by ( 1) paying the bond penalty; ( 2) completing the contract using the existing contractor; ( 3) arranging to have another contractor complete the project and making available, as the work progresses, money for any additional cost incurred under the new contract, or ( 4) having the owner arrange for completing the work, with the surety paying up to the penalty amount. Usually, the surety enters
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