In our last two bulletins we explained the importance of Los Angeles consumers hiring only licensed, bonded, and insured contractors to work on residential and commercial property jobs. We also discussed where consumers can go to determine whether or not a contractor is licensed.
In this third blog in our three-part Consumer Affairs Bulletin series, we provide additional tips on how consumers can protect themselves when hiring contractors to work on homes and commercial properties!
Additional Insured Endorsement on Liability Insurance Policy
While your contractor may tell you that he or she has a general liability insurance policy (which is great!) you should then follow-up with the contractor to make sure that the contractor lists you, the consumer, as an “Additional Insured” on the policy!
In insurance jargon, an “Additional Insured” enjoys the same benefits of being insured on the insurance policy in the event of a claim, in addition to the one who originally purchased the insurance policy! This means that, among others, an Additional Insured has the right to file a claim for damages against the primary insured’s insurance carrier!
Contractor Automobile Insurance
As a consumer, you should also check to see not just whether or not your contractor has an automobile insurance policy, but also whether the policy’s limits are high enough for the task at hand. Many small contractors will low-ball an offer to work on your property, and then show up for work with vehicles that carry only the minimum auto liability coverage limits, as required by State law. However, those minimum coverages are almost never enough to cover the costs of even a small accident that involves damage to a person or property, much less a serious accident!
So, guess what? If there’s a vehicular accident involving damage to property or to a person, and this accident happens during your construction project, or on your property, and the contractor’s insurance coverages are very low, you may be the one who gets sued and have to pay the costs!
Some unscrupulous contractors will provide you a low-ball bid on a project, and even show up to do the work for you, but require you, the consumer and owner of the property, to obtain a building permit that lists you as the “Owner Builder” on the job. This type of an arrangement wrongly implies that you are personally providing your own labor and material, and let’s be clear, if you agree to be an “Owner-Builder” under the permit, you have assumed all the responsibilities that are typically required of a licensed contractor!
As such, when you agree to become the “Owner-Builder”, you have agreed to be held liable to serious financial risk for any injuries that are sustained by the unlicensed contractor and his or her employees, while working on your property! Your homeowner’s insurance may not provide coverage under this scenario, and you may even be considered the “employer” of the contractor and his crews under state and federal law, and be required to withhold payroll taxes, provide worker’s comp and disability insurance to these “employees”, and even contribute to their unemployment insurance!
So, be aware that if you choose to do a project in this manner, you are taking a big risk, and we recommend that you reconsider and do the smart thing, which is having the contractor’s name on the city permit!
At Weinstein Construction Corporation, our family-owned Los Angeles business has been in continuous operation under the same name and license since 1977! During this time, we have provided more than 72,000 free inspections to residential and commercial property owners in the greater Los Angeles region! Call Angela today at (800) 862-6582 for a free inspection and review of all your construction needs!