Contractors Doing Structural Work for HOA and Condo Associations

The key is to do all that can be done post project to assure nothing goes wrong.  Taking a realistic view that “insurance” is not the solution as insurance only pays after something has gone wrong!   Including rules for contractors doing structural work for HOA and Condo Associations in their CC&R’s can help with the risk management for such projects.

What HOA and Condo Associations Don’t Know Will Cost Them!

How do you then assure that you have done all that can be done to assure nothing goes wrong?  Here are just a few brief pointers. 

As a rule, all HOA and condo associations should have in their CC&R’s a stipulation as to what is required when any contractor is hired to do structural work. 

An example I was recently asked about is when a unit owner buys the adjoining unit and hires a contractor to make two units into one.   Basically, do any work at all beyond a simple remodel or upgrade in a unit.

Just a quick list of items to consider.

The past is the best indicator of the future!   Yet for some odd reason no one seems to ask the simple question.  “What is the 5-year loss history for the contractor and all subs on the project?” 

These are the most missed items that matters the most!   

1. Liability, premise operations as well as products completed operations.
   1. How many and what type of liability claims do the contractors have?  Particularly for products completed operations.
   2. Workers compensation?  Are they safe?  What do the past 5 years tell us?
   3. Keep in mind the unit owner and the association can be sued when a contractor’s employee is injured in the unit or common area! 
2. Proper additional insured forms required by contractor and all subs they hire. 
   1. The contract is typically between the unit owner and the general contractor.  The General contractor will hire sub-contractors as well.   When a signing party to the contract requires, they be named as an additional insured with a specific additional insured form they receive the benefit as it is “required by written contract”.
   2. However, in this case we have an association that needs to also be named as an additional insured.  The association typically not going to be a signor on the contract.  In this case it creates a “privity” coverage issue unless the proper additional insured forms are used.  Note: this is also true of the unit owner when a general contractor contracts with a subcontractor the same issue exists.
3. Indemnity and hold harmless agreements in place a properly done, as well as confirmation the contractors and subs insurance policies have action over and third-party action over coverage. 
   1. Consider a worker falling from a ladder.  It is worker compensation between the worker and his employer. but the worker fell on who’s property?    Both the unit owner and association can find themselves being sued directly by this worker whom may make a true or false allegation of contributory negligence.  
4. Property coverage Builders risk and after work is done.   Very important to specify whom is insuring what, also does the work add to the value the associations master policy must buy as it is structural? Or does the unit owner add it as improvements to their condo owner’s insurance?
5. How much liability insurance should the contractor and any subs they use be required to carry?  Also is the coverage correct for the work, and risk…

These are just the top 5 things we see that create claims that go badly. 

This is worth repeating.

The intent as you may notice with items 1-3 is to not have anything go wrong to begin with.  Ie. Looking at the 5-year loss runs, understanding the likelihood of having a loss, (Loss runs), proper risk transfers, (hold harmless and indemnity, as well as additional insured status done properly) and in proper order if things do go badly. 

Items 4 and 5 are the back stop, not the intended solution. very different then how most look at insurance and risk…    “Let’s plan to not have a problem to begin with!

Lastly, check it out.  Review the contractor’s policy to assure they have the proper coverage for the work they are doing.  I know this sounds like a lot.  Honestly it is about 30 minutes of work that we do for our clients.  Which is a deal compared to the time, stress and frankly trauma a client goes through when something does go wrong.  

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