Most homeowners would never think of driving without auto insurance or living without health insurance, yet some homeowners regularly hire contractors without properly checking both liability and workers’ compensation insurance. All companies and individuals hired to complete work at or in the home should carry both liability and workers’ compensation insurance. Furthermore, some homeowners regularly lend tools to contractors and help them with the work without fully understanding the tort liability consequences of their actions. To limit tort liability exposure, homeowners should always warn workers about any known hazards, never lend tools to workers, and never help workers.
Liability & workers’ compensation insurance
Liability insurance is designed to pay for damage resulting from a contractor’s work. For example, if a tree service cuts down a dead tree in your front yard and the tree accidentally falls through your roof or through your neighbor’s roof, the tree service’s liability insurance would most likely pay for damages. If, instead of falling through your roof, the tree fell and injured your neighbor, the tree service’s liability insurance would again pay.
Workers’ compensation insurance is designed to compensate the injured worker or injured contractor in the event of a job-related accident. If the tree falls onto and injures one of the tree service’s employees, the tree service’s workers’ compensation insurance should pay the injured employee’s hospital bills and lost wages. Since many contractors and company employees are injured on the job each year, workers’ compensation insurance is quite expensive. Some high-risk home service companies claim that as much as 40% of their cost is workers’ compensation insurance.
Just as some individuals do not have health insurance because of the cost, some small companies do not carry proper insurance for the same reason. From the small business owner’s perspective, “Insurance is an expense that can be eliminated.... After all, we haven’t had an accident in years....”
Check insurance yourself. Home Reports™ recommends hiring properly insured companies. The only way to determine if the contractor you are planning to hire has insurance is to request that the contractor’s insurance company(ies) send(s) directly to you a copy of the insurance certificate(s). The certificate(s) should have your name as the certificate holder, so that if the insurance policy is cancelled before the expiration date, the insurance company(ies) will notify you of the cancellation. Because some contractors have actually forged such documents, you should never accept a copy of an insurance certificate directly from the contractor. A typical insurance certificate lists the types of insurance the contractor has through the company and includes the policy number, effective dates, and policy limits. Two key insurance types to look for are general liability and workers’ compensation. If either of these sections is not completed, the contractor does not have this type of insurance coverage through the certificate-issuing insurance company.
Home Reports only checks the insurance of Best Pick™ Companies. However, as outlined in the legal disclaimer on the inside front cover: “All statements concerning insurance, licenses, etc., are informational only and are historical as of March 23, 2009. Since insurance and licenses can expire and can be cancelled, homeowners should always check such information for themselves.”
Tort liability
In addition to a workers’ compensation claim, an injured worker may be able to make a tort claim against the homeowner. While a workers’ compensation claim is limited to hospital bills, wages, and disability, a tort claim has no limitation. Tort claims result from either active or passive negligence on the part of the homeowner. Active negligence results when the homeowner does something that contributes to the accident, such as lending the worker a tool or holding the ladder. If the tool injures the worker or if the ladder falls, a tort claim may exist. Passive negligence results when the homeowner fails to do something like warn the worker of a known danger, such as a hole in the yard. If the worker gets hurt falling into the hole, the worker may be able to make a tort claim against the homeowner.
To limit tort liability exposure, homeowners should always warn workers about any known hazards, should never lend tools to workers, and should never help workers.