If you own a condominium unit, and work needs to be done on your property, you may not realize how important it is to make sure the proper paperwork is in place. Whether it’s an upgrade or a repair, there is legal documentation that should be collected from the contractor, whenever they’re performing work inside a unit, prior to the contract being signed and work starting. Specifically, these documents should be obtained:
- Certificate of Insurance (COI): A certificate of insurance is a document that would be provided by the insurance agent of the contractor. It’s typically one or two pages (depending on how much policy information is given) and often says at the top “Certificate of Liability Insurance”. This document gives information such as the named insured, policy limits, coverage period, insurance company and policy number.
- Additional Insured Endorsement: This endorsement comes from the insurance company, NOT the agent. This is a form that actually changes the policy to list a specific party as an additional insured which is important in the event of a claim that is the fault of the contractor. You must have this specific form to actually be listed on the policy for that policy year. Don’t assume Additional Insured forms transfer from policy year to year. This form can take a few days to process from the insurance company.
Why is it important to have an Additional Insured Endorsement versus a Certificate of Liability Insurance?
Both the Association and Unit Owner need to be listed as an additional insured on the contractor’s policy (especially the association), because it allows the parties to more easily place a claim against the contractor to show the contractor as negligent. Another major reason for this endorsement is that there are exclusions on contractor’s policies specific to working on multi-family homes. Condominiums are included in this classification, so if the policy has this exclusion and damage occurred, their insurance company would be obligated to pay for the loss, even though it may have been the contractors fault. By having an Additional Insured Endorsement, the insurance company is agreeing that they are allowing and aware of the exposure. In cases like this, a COI is not sufficient.
Let’s give you an example! A contractor comes in to repair a toilet in a bathroom and breaks the pipe causing water to spray everywhere and leak 4 stories down before water was shut off and contained. Why should the owner’s or the association’s policy have to pay for that claim? They shouldn’t. Having an additional insured endorsement allows the owner and association insurance policies to go after the contractor’s insurance policy for reimbursement.
Even if this is a maintenance responsibility by the owner, or the association has no involvement in hiring the contractor, the association is most important entity that should be listed as an additional insured. That’s because they hold the master policy to the entire building and their policy is primary. It’s an extra step but the protection that the unit owner gets with these documents can make for the difference between a seamless or disastrous claim.
If you’re getting an upgrade or repair on your condominium unit, call Vern and Sara from the ABI team, and we can help make sure you’re protected with the right documentation and insurance before you sign the contract. We are one of the largest agencies in Oregon that writes condominium and HOA insurance, so we’ve got hands-on experience with the kinds of claims that are likely to occur.