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contractor insurance, liability, lien release

KWOLSEN | Posted in General Discussion on May 3, 2011 09:55am

I’m hiring a contractor who is currently licensed, has expired bond insurance and expired workman’s comp, work is in CA.  I pulled the permit as owner builder.  This contractor is highly recommended from a friend who basically had him build his entire 3500 sq. ft. house.  The job is some wall framing and hip roof framing for an addition, about 200 sq. ft. extension to existing kitchen.  The job is $4.4k.  So, what should I do to protect myself liability-wise:

1.  Do I get him to sign a statement that if him or his workers are injured that homeowner is not liable.

2.  I’m planning to call my home owners insurance (Allstate) and see if they can bump up my coverage during the period the guys will be working.

3.  What about a lien release, do I put that in the contract that describes the work that I want a lien release for all materials that he will order ?

I’m pretty sure this guy will do a great job and nothing will happen, but I’ve heard horror stories of attorneys gone wild with injuries.  

Any advice ?

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  1. und76xx | May 03, 2011 03:00pm | #1

    Several Issues

    You raise several issues in your post and they are covered by different statutory provisions - at least here in Michigan.  I am not familiar with California law.  You cannot sign away an amployee's rights against a worker's comp claim.  So if the contractor or his employee is hurt on the job you are liable for that injury along with the employer.  Such injuries - a fall from a roof for instance - can result in huge damages including pain/suffering.  My insurance company - StateFarm - will not cover me if , with my knowledge, I hire an individual without proper insurance coverage.  If the contractor tells me he/she is covered but in relaity is not then I am covered except the insuror will file a subrogation suit against the business owner.

    Leins are a different story.  The lein right is held by the supplier of goods or the sub-contractor.  Again, at least here, you cannot simply have a waiver of those statutory rights.  I suspect, even if that was possible, the waiver would have to come from the supplier and not the contractor since the right under the law flows from the supply of goods and not the individual standing of any of the involved parties.

    As always be careful out there.

    Mike

  2. DanH | May 03, 2011 07:26pm | #2

    If you want to be fully protected, you need a special signed statement from the guy's insurance company stating that he's covered for liability/personal injury, and you need lien waviers from his employees, subs, and suppliers.  This all can be done, and is SOP in some situations/localities, but it's certainly not universal.

  3. davidmeiland | May 03, 2011 07:39pm | #3

    You're NUTS!!

    Why not hire someone whose license and insurance are in good standing and will protect you? Your homeowners insurance is not workers comp insurance--if you call them and tell them you are knowingly hiring unprotected workers and want your policy to cover them, they should probably cancel you. There are two ways to protect yourself, and you're doing neither. One of course is to hire a contractor with the correct comp policy, the other is to hire an employee and buy a comp policy on them yourself. Having someone "sign a statement" waiving their rights (or someone else's) is only going to work if their lawyer never sees it.

    If you want a lien release from vendors providing materials, be prepared to provide a form that you want signed, and then know how/when/by who to get it signed. 

    You don't need an attorney to "go wild" with an injury and create a horror story, all you need is an injured worker on your premises. Friend of mine and another guy were working for a homeowner in a situation like you're planning. Friend's friend fell off ladder and broke his back. Total cost of medical care and long term disability approaching one million. Limit of homeowner's policy half a million. Hospital collected the half million and then sued the owner for the rest. They owned the house free and clear and ended up selling it to pay the judgement.

    Seriously, how lucky do you feel? Just get someone who can handle your job correctly. Tell your friend's carpenter that you need to move on to someone whose business hasn't collapsed.

    Oh yeah, I did this on a customer's premises three months ago. Sh!t happens.

    1. KWOLSEN | May 04, 2011 11:08am | #4

      thanks for the feedback

      What if I hire the GC and he has no workers, just himself?     

      1. davidmeiland | May 04, 2011 12:06pm | #5

        As far as I know

        you would ultimately be on the hook for any injuries. 

        Suppose he gets hurt. He goes to the hospital and receives treatment, that much is automatic. The bills are first sent to the worker's comp system, because that's what hospitals do when someone comes in with a "work injury". it won't be long before they determine he is not actually covered by a policy in force, so they'll start looking around for an alternate source of payment, which would be you.

        The injured worker will long since have told them that he told you he was uninsured, because he'll see the huge bills coming in and know that he has to get out from under them. He will swear up and down that he told you, and he'll be right, won't he? Don't entertain any illusion that he'll take one for the team.

  4. cussnu2 | May 05, 2011 01:37pm | #6

    From the California workers comp website, a sole proprietor does not have to have workers comp insurance but (and there is always a but) roofers always apparently do in CA.  Most normally, small business owners would need to supply you proof of health coverage instead of workers comp.  Owners are not normally covered by workers comp unless they specifically buy a rider that adds themselves to the policy.

    Q. My spouse and I are the sole owners of our business. We have no employees. Are we required to obtain workers' compensation coverage?

    A. Generally, coverage for sole owners is optional. You would, however, need to have workers' compensation coverage for any employee you may hire, even if it’s just one employee, and even if it’s just temporary employment. You should consult with your attorney, insurance agent or broker, or carrier regarding the specifics of your situation and your options.

    The point still stands though that you are nuts if you hire someone to work that isn't insured.  If it a guy with employees, you need proof that he has proper coverage for himself and his employees which may be both under a work comp policy or it may be under two different policies one work comp and one health policy...oh and if its a health policy, make sure its not a spouses policy which might (most likely would) exclude injuries incurred on a job.

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