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If you look closely at your contractor's or subcontractor's certificate of insurance, you're likely to find a disclaimer that reads something like this:

This certificate is issued as a matter of information only and confers no rights upon the certificate holder.   This certificate does not amend, extend or alter the coverage afforded by the policies below.

Normally, the certificate of insurance is produced specifically for the purpose of demonstrating that a particular party is a "certificate holder" or "additional insured."  But the very document itself has a boldfaced disclaimer that the certificate cannot be relied upon.

This begs our question:  Is the certificate of insurance worthless?

Legally Speaking...Yes

It will be the burden of the insured (or the party claiming coverage) to prove the existence of a policy and coverage.  Tunstall v. Stierwald, 809 So.2d 916 (La. 2002).   

There is clear case law that reliance on certificates of insurance may be easily misplaced.   In T.H.E. Insurance Co. v. City of Alton, for example, the US 7th Circuit held that a party "could not simply rely on the certificate [of insurance] for the terms and conditions of coverage."  227 F.3d 802, 806 (2000).

A certificate of Insurance is not an insurance policy, and the certificate itself is not ordinarily issued by the insurance company.   Simply speaking, a party claiming coverage will likely not meet its burden of proving insurance coverage by pointing to a certificate of insurance only.  

So, How Do You Confirm Insurance?

Our friends in Mississippi who run the Construction Law Toolbox blog posted last week asking "Can I Rely On My Subcontractor's Certificate of Insurance?"   They provide a good analysis of the problem with certificates of insurance in their article, and they offer a "best practices'" for those in the construction industry:

The best business "policy" is to always obtain and read the actual insurance policy itself. In reviewing the policy, take into consideration the circumstances related to each particular project.

While this is more difficult than the ordinary receipt and filing of your contractor's or subcontractor's certificate of insurance, it's the only way to confirm that the insurance policy required by your contract has been properly provided.

Options If You Have a Certificate, But No Insurance

What to do if you have a Certificate of Insurance...but no actual insurance? 

While you may not have a perfect claim against the insurer, you have a number of alternative claims.   Some example claims:  A suit against the insurance agency for negligent or intentional misrepresentation, or for errors and omissions, or a suit for breach of contract against the person or entity who was required to provide insurance.

These claims may expire quickly, so if you a certificate of insurance (but, no actual insurance), it's important to promptly seek the advice of counsel.

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Rarely do we attempt to "wax political" on pressing legislative issues. So, again we will keep most of our opinion to ourselves and let the BIAW, the Building Association of Washington, do our reporting for us.

The Building Association of Washington is a Washington State Non-Profit Corporation formed back in 1966 to provide assistance to building industry companies who find difficulty uniting to fight government interests to regulate their trades. The BIAW provides more information about its services online and its mission statement is as follows:

The Building Industry Association of Washington is the voice of the housing industry in the state of Washington. The association is dedicated to ensuring and enhancing the vitality of the building industry for the benefit of its members and the housing needs of the citizens.

To accomplish this purpose, the association's primary focus is to educate, influence and affect the legislative, regulatory, judicial and executive agencies of Washington's government. The Building Industry Association of Washington will offer its membership those services which can best be provided on a state wide basis and will disseminate information concerning the building industry to all association members and the public.

Now that we have fully disclosed their interests - your business's interests - it will be easy to see why they so staunchly oppose several pending initiatives before the Legislature.

In a recent newsletter, which you can receive with membership, the BIAW expresses special concern with two specific initiatives.

HB 1393 - Mandated Warranties

The first of these initiatives will hit most of you the hardest. On March 11, 2009, the WA House of Representatives passed Rep. Larry Springer's (D-Kirkland) new home warranty bill, HB 1393. In short, the bill strives to mandate a new home warranty for all new residences, something that Washington state builders have been able to avoid in the past.

Unlike other states which follow the FHA model new home warranties, WA has stayed away from passing legislation in the past which would mandate such warranties.

The BIAW stresses several reasons why the bill is simply - a bad idea.

1) The warranties must be back backed by insurance which is not available -

    Simply put, the bill mandates warranties which must be backed by an insurance policy. Unfortunately, the insurance "product" is not available, and when made available, the costs will render projects impracticable or severely costly. The fear is that many good subcontractors will go under as a result of such a mandate.

    BIAW General Counsel, Timonthy Harris, states:

"Its not as simple as requiring builders to purchase an already-available warranty product"

"This isn't a warranty bill as much as it is a new and easier way to sue builders."

2) The bill prohibits waiving the implied warranty of habitability -

    Similar to the above, the concern is that the bill merely seeks to make consumer-based litigation more simple and easy. BIAW believes that the effect will simply put businesses out of work, limit the pool of contractors, reduce competition, and force unprecedented costs on the homeowner.

The BIAW pledges to fight the bill as it goes before the Senate later this month.

SB 5895 - Mandated Inspections and Bonding Increase

Another bill seeks to impose harsher requirements on contractors. The bill was introduced in the Senate as SB 5895 by Sen. Rodney Tom. In short, the bill seeks to impose "condo-like" warranties on all new homes, mandating third-party inspections prior to closing.

One of the issues that might keep contractors on the fence is the provision to double the contractor bond from $12,000.00 to $24,000.00. Though this raise undoubtedly costs the general contractor additional bond premiums, other contractors - subcontractors and suppliers on jobs - would likely be willing to support such a proposal.

In a time where collecting against defunct general contractors has become difficult and costly, subcontractors have been left to fight over the measly $12,000.00 bond that general contractors must post with Labor & Industries. Mandating a larger bond would provide additional security to contractors who are reluctant to provide labor on larger jobs.

Regardless, the BIAW is more concerned with fighting the costs that are imposed upon contractors in general, and the fact that this proposal is lumped with additional warranty demands makes this bill a target of the BIAW.

SB 6035 - Reto-bution Bill

This bill has been discussed for quite some time. The lingering has provided enough time so that BIAW could put together its defense of this bill.

In short, SB 6035 has been termed "retro-bution' because it seeks to force retrospective ratings programs - such as the one provided by BIAW - to disgorge refunds received from the State of Washington to employers. You can read more about how the retrospective programs work at the Northwest Progressive Institute, who provides a different perspective.

SB 6035 has been termed retrobution against BIAW and the Master Builder's Association (MBA), who each supported Gov. candidate Dino Rossi during the past governor's election.

The funds remaining after refunds are paid to employers are held by the program associations - like BIAW and MBA - to be used as they please. In the past, these funds were used by the organizations to support candidates like Rossi, in their election bids.

It is now alleged by both MBA and BIAW that this bill is simply a democratic party's attempt to restrict the organization's right to free speech, by limiting political contributions and political speech.

Stay tuned for more information and reporting on these battles in Olympia. The BIAW certainly does not intend to back down from protecting its ability to help contractors in Washington state.

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 The Seattle Times reported in its Sunday edition that four South King County areas - Auburn, Kent, Renton and Tukwila - are at a high risk for flooding this upcoming fall and winter because of January damage to a flood-control dam on the Green River.

Unfortunately, the Army Corps of Engineers and other authorities concede that there's very little they can do to mitigate the risk, advising residents of these areas to buy flood insurance and be prepared for evacuations.

Having offices in New Orleans, LA, and experiencing the devastation of Hurricane Katrina, Wolfe Law Group brings a unique perspective to the issue.   

Here are some legal considerations:

• Flood Insurance.   The authorities recommend getting it, and there really isn't a reason to procrastinate.  Compared to other insurance products, flood insurance is fairly inexpensive, and in the event of a flood-loss, it will be very necessary.   Your other insurance policies will very likely exclude flood damage, and flood damage - unlike earthquake or wind damage - usually completely ruins everything in its path.
   
• After a flood loss, document your damages and be very through in your insurance claim.   Take pictures and inventories of everything, and offer your insurance adjuster the chance to see the damages first hand.
   
• Contractors:  flooded areas bring a large amount of contracting work.   Be careful of getting ahead of your company financially, however.  While work may be in abundance, the money to pay for that work could get tied up in insurance disputes or just the lenghly claim process.   Be careful about doing too much work without payment.
   
• Property Owners:  Be very aware of post-disaster fraud.  

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This post was contributed by Holly McCarthy, who writes on the subject of a construction management degree online. She invites your feedback at hollymccarthy12 at gmail dot com.

After working in heavy construction or homebuilding for many years, some feel like they are ready to take on small jobs on their own or maybe even start their own small business.  This can be a great and satisfying way to earn some money and be your own boss. 

Regardless of the size of your construction operation, there are some main guidelines that need to be kept in mind when running a reputable small construction business.  Not taking care of things in the right way could end up costing you a lot of time and money if you’re not careful.  So, make sure that you take care of business before going into business for yourself.

Make Sure You’re Covered

If you are planning on taking on jobs of even a very small scale, you need to have the proper insurances in order.  General liability policies are fairly affordable and won’t cut in to your overhead too much.  The average general liability policy for a small scale independent contractor is between one and five million dollars.  Rates will vary from location to location, but the money you spend may end up saving you from major liabilities later on down the line.

OSHA Compliance

From safety goggles to steel-toed boots, whatever the OSHA requirements for the job you’re working on happen to be—comply with them.  You may think that a luxury of owning your own business should make this less important, but all safety precautions must be taken at all times.  Often, if you are investigated by the insurance company and are found to be negligent, your claims may not be covered, and you will be personally liable.

Maintain Equipment and Vehicles

Properly maintained vehicles and tools will save you time and money down the road for sure, but will also help prevent any unforeseen accidents related to the equipment.  Make sure that you have pneumatic tools serviced regularly, which is often done for free by fastener sales reps when you purchase from them exclusively.  Vehicle maintenance should be done at a reputable location; save all receipts and records of maintenance on vehicles and equipment.

Verify Employees

With new compliance laws going into effect for large companies in the coming weeks, there will be a light of employment issues in the news.  Don’t get caught up in the politics.  Simply make sure that your employees are properly documented and you shouldn’t have any problems.

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A recent survey by the Louisiana Workforce Commission found that 1 in 5 Louisiana companies may be violating the state's workers compensation laws.  

The unsettling survey is part to blame for the state's new fraud program, which is aimed at identifying and bringing into compliance businesses not providing workers’ compensation coverage.

As reported by nola.com, violators will face penalties of $250 per employee, per incident. Repeat offenders could face criminal penalties and have the businesses shut down

The fraud program should be a warning call to non-complying contractors in Louisiana. 

While the commissions hasn't singled out the industry, it's safe to assume that contractors will be the target of the commissions new fraud program.   The construction industry faces some of the highest workers comp rates, and most frequently encounter the fine line between an "employee" and an "independant contractor."

When describing fraud problems, Chris Broadwater, director of the LA Workforce Commission, told nola.com that many business list "workers' jobs as less hazardous than they are, or by claiming that their employees are independent contractors."

The Rates
Provided examples of high and low workers comp rates were, not surprisingly, between construction workers (up to $13 per $100 paid) and clerical workers (60 cents per $100 paid).

The difference is clearly huge, and perhaps it's why the first comment to nola.com's story on the fraud program complained about the cost of compliance:

Well, bring the rates down and maybe businesses here in Louisiana could afford to stay in business with less exorbitant rates from a monopoly insurer for all new businesses (LWCC). Small businesses are often forced into questionable cutbacks to feed the "gimmie" attitude of our state!

The comment likely resonates with contractors in Louisiana, who are competing in a down construction market with other contractors who aren't providing workers compensation (remember, only 20% of businesses in Louisiana do).   It's seems nearly impossible to compete with other businesses who - from the start - can discount their bids by 13-15%!

Not surprisingly, construction companies have substantial motivation to classify workers as independent contractors rather than employees.

Employee v. Independent Contractor
The Louisiana Workforce Commission has written an online article about this very problem, reminding contractors that the difference between employees and independent contractors is not a subjective determination - but something subject to specific statutory criteria.

With regard to the applicable statute, the Louisiana Workforce Commission states:

La. R.S. 23:1021 defines an independent contractor as any person who renders a service, other than manual labor, for a specified recompense for a specified result either as a unit or as a whole, under the control of his principal as to the result of his work only, and not as to the means by which such result is accomplished. Independent contractors who meet this definition are not covered by the Workers' Compensation Act.

Interestingly in Louisiana, a key factor in determining whether someone is an employee or independent contractor turns on whether they are required to perform "manual labor."

According to the article, Louisiana courts "have defined 'manual labor' liberally, looking at the hands-on feature of labor combined with the strenuous quality of the work to determine whether a task is manual or not."

If a substantial part of an independent contractor's work time is spent in manual labor, your inquiry is over, and the worker will be covered by the provisions of the Workers' Compensation Act.

Confused?
The workers compensation laws in Louisiana are confusing, and your business may be avoiding the law simply because it's so difficult to understand.   However, the cost of non-compliance is great.  Not only will your business be penalized by the commission, but you'll also find yourself liable if someone gets injured on the job.

The Office of Workers' Compensation Compliance Division has set up a number for businesses with questions about the requirements at 225-342-5658.  Fraud can be reported to the Fraud Division at 225-342-2226.

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Slowly but surely, these industries have responded to the demand, and there are a number of products available to green builders and property owners to help limit their exposure in the event of a green building problem.

Green Building Insurance
It appears that Fireman's Fund Insurance was the first to offer green building insurance products in the fall of 2006. The "Green-Card Insurance Suit" self-proclaims itself to provide insurance solutions to builders and owners whether "you've built green from the ground up, have made green renovations to existing buildings, or would like to rebuild as green in the event of a loss."

Quickly thereafter, the Insurance Journal predicted more insurance products to come, and over the next two years Aon, Allstate and Travelers' all rolled out their contributions to the green building insurance market.

The insurance policies being offered are interesting in that they protect against green building defects and deficiencies, and in some instances also allow owners to "upgrade" when green building requirements change.

While these experimental programs are exciting for the green building industry, it's too soon to predict how they will be interpreted, what exact coverages will be allowed, and how they will hold up in the courtroom. Stay tuned...

Green Building Bonds
Contractors and property owners are quite familiar with the concept of "performance bonds." Not so familiar, however, are "green building bonds."

With certain government projects mandating green building standards, and green building requirements finding its way into construction contracts across the country, there is some talk about whether contractors should purchase and file "green building bonds."

The issue of green building bonds and the complex questions surrounding them are discussed in detail in two good posts by the Green Building Law Update blog here. One of the most peculiar presented complexities relates to the general identification of the bond - is it a performance bond, or a license / compliance bond?

With bond requirements popping up through governmental regulations, it seems surety companies are not certain how to exactly issue the bonds.

Once again, like the insurance programs, it's still too soon to predict how this issue will resolve itself. For now...green builders ought stay tuned.

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