Good news, you contact a contractor and the qualifications and skills are sufficient for the project. References check out, Licensing validated, the local BBB gives you the thumbs-up, and the contractor's insurance agent even sends over proof of insurance coverage. You are ready to now say, go do the work... but wait... Proof of Insurance.... Do you know how to read the policy limits?
Here are a few important issues:
- The section 2/3 down on the Acord form is called "Description of Operations". Make sure the policy description cooresponds to the risk. Example: The description may say "Plumbing operations to include and not limited to installation, repair, water lines to homes, water heater installation and repair". BUT, if the contractor is being engaged to drop dead trees in the yard, there may be reason to believe the policy will not provide coverage for the task.
- "Each Occurrence" is the next VERY important item to review. "Each Occurance" means that in the event the insured is found liable, the policy will only pay up to this amount. In this example, the most the policy will pay is $300,000.00... Sounds GREAT unless the insured is working on a 1.2 million dollar home. Now, if the insured is a plumber installing pipe with a blow torch and burns the home down, we have a problem. The policy will pay up to $300,000.00 but the home was worth a lot more. When checking out insurance coverage make sure the coverage is sufficient for the risk.
- Effective dates for the policy are traditionally defined as "Policy Effective Date" and "Policy Expiration Date". Don't assume that the recently faxed document has dates that include today. We have seen where the customer recieved a document from the AGENT that clearly showed the expiration of the policy. Lack of reading the document proved very costly to the homeowner.
This is a high level review.... As a professional looking out for your client, take the time to review and bring understanding to the issues at hand.
Just some interesting insurance issues to ponder.