Insurance for Vendors

Insurance comes in all types; but the two kinds a property owner or manager should insist a vendor has are worker’s compensation coverage and liability coverage. While only worker’s compensation is required by law, liability insurance is strongly recommended before allowing a vendor or contractor to work on ANY property, especially multi-family property. While this paperwork is the sort of thing easily overlooked, it is critical that every owner and manager fol­low a consistent program. You can view the suggested program list via the blog link below.

1) Worker’s compensation insurance covers the employees for on the job or work related injuries. Worker’s compensation coverage is required for almost ALL California employers. If your vendor or contractor has ANY employees, even one who is part-time, they are likely required to have this coverage.

2) Failure to have worker’s compensation insurance, when required, exposes the employer to civil law suits and liability beyond what they would otherwise be exposed to. It is to a business owner’s benefit to have this insurance coverage.

3) If you cannot show evidence of worker’s compensation coverage for your contractor through another insurance company and you have worker’s compensation coverage of your own because you have employees, your worker’s compensation carrier may force you to pay worker’s compensation premiums on the amount of your vendor contracts.

4) This additional premium will generally be triggered during a routine audit performed by your own worker’s compensation carrier. Your carrier will ask to see your vendor’s evidence of insurance. If you do not have evidence of coverage for a vendor, they will include any payments made to the vendor during the audit period as wages and charge a premium based on those costs.

5) More and more laws hold a property owner or manager responsible for the mistakes of the vendor or contractor. You may find yourself responsible for a contractor’s failure to have worker’s compensation coverage under a number of legal theories, including California Labor Code Section 2810.

6) Liability coverage covers the contractor or vendor in the event they cause damage to property or they injure someone. Not only must you verify that they have this coverage, but you must verify that they have coverage limits that are sufficient for the exposure of the job.

7) The sufficiency of their liability insurance limits will be determined by the size of the job, the likelihood of property damage or injury, and the gravity of the harm or damage they could do if something went wrong. For small jobs, with little likelihood of serious damage or injury, a limit of one million dollars is sufficient. For larger jobs or jobs where the risk of serious injury is greater, limits of ten million dollars might be necessary.

8) You must verify that all owners and the management company are named as additional insureds on the liability policy. This means that if the owner or managers are sued because of the work product or mistake of the contractor or vendor, the insurance of that contractor or vendor will be responsible for the cost of defense and any monetary liability of the owner or manager due to the error of the contractor or vendor.

9) You should also have your vendor or contractor agree that their liability insurance is primary and the policy should provide for thirty (30) days prior written notice of cancellation.

10) Liability insurance certificates showing current coverage that will last through the period of the job, with acceptable limits and showing the owner and manager as additional named insured, should be delivered to the owner or manager before any work is done or deposit payments are made to the vendor or contractor. 

-The MRU Editorial Team