With the current labor shortage, contractors and contracting companies are backlogged.

Homeowners with plumbing, electrical, and construction needs are being told it will take months to get a someone in. Because of this, many homeowners have turned to social media to recruit a skilled laborer. Hopefully one who can perform the work sooner than those companies already contacted. However, in their desperation to find a qualified tradesperson to work on their house, some of these homeowners are skipping important steps to protect themselves from liability. 

While informally hiring someone recommended to you on social media may shave down your waiting time and reduce cost, from an insurance perspective, this can be cause for alarm. As a homeowner with valuable assets, it’s important that you take the proper precautions when hiring a contractor to work on your home. This includes getting a written contract and obtaining proof of insurance from the contractor. Failing to do this could leave you on the hook for damages if property damage occurs or if your hired help is injured on the job. 

You may think you are already protected from liability by your homeowner’s insurance policy. However, in most cases, this policy does not cover claims that may arise out of the contractor’s work. We have had many clients assume that because their homeowner’s insurance policy is designed to respond to property damage and injuries that take place on their property, they will be covered in the event the contractor makes a claim. In fact, contractors typically fall outside of the scope of your homeowner’s insurance and almost always require a separate business liability and workers’ compensation policy of their own, or at a minimum, a specific endorsement to your homeowner’s policy. 

Before You Hire a Contractor 

When the county hires a contractor, it always details the scope of work in a written contract and requires the contractor to produce proof of insurance via a form called a Certificate of Insurance prior to starting the job. This protects the county from being held liable for damages should there be cause for a claim while the work is being performed. At GIS alone, we send out hundreds of certificates of insurance for our clients every week. 

Many homeowners believe that because the work is performed on their private property that they don’t have the same responsibilities. This is a common misconception we see all the time. In fact, if you hire an uninsured contractor for work valued at over $1,000 in Indiana, per Indiana Code Title 22. Labor and Safety § 22-3-2-14, you could be responsible for any claims that result from the work performed. This can be hugely expensive, particularly for injuries where the contractor is required to undergo treatment and unable to work for a prolonged period. 

Under the above cited code, hiring an uninsured contractor to perform work valued at over $1,000 automatically designates you as liable to the same extent as the contractor. Therefore, it’s so important to make sure your contractors are properly insured by obtaining a Certificate of Insurance (COI). 

For example, let’s say you, a homeowner, hire a friend of a friend recommended to you on social media to trim your trees. You know the person has the skills required to complete the job, but you don’t have a formal contract and you didn’t request proof of insurance. The work is valued at $2,500. While performing the job, the contractor falls out of a tree and breaks his a leg. It just so happens that the contractor did not have any insurance in place to cover medical expenses, so the contractor files a suit against you to pay for all medical expenses and wages lost as a result of the injury. Because you were deemed liable under Indiana state code, you are now required to pay for these expenses in full out of your own pocket. 

How to Obtain a Certificate of Insurance

If your contractor is insured, obtaining a certificate of insurance is easy. All they need to do is call or email their insurance provider to request one. Your job as the homeowner is to simply ask your contractor to reach out to their insurance provider and supply you with a copy. 

There is no reason why your contractor’s insurance provider would be unable to provide a certificate of insurance if they have an active policy. If your contractor declines to provide this proof of insurance, we strongly recommend you opt to work with someone who will supply this documentation to avoid being held liable for any potential claims. 

Talk to Us before You Start 

The appropriate amount of coverage for your contractor will vary depending on the scope of the work you need done. Note that if your contractor is insured but has insufficient coverage to satisfy their claim, you could still be required to pay the difference.

Before you hire an independent contractor to work on your home, we strongly recommend connecting with us to review the scope of work and determine what an appropriate amount of liability coverage is for that job. We’re also here to answer any questions you may have about your homeowner’s policy.