Expert: Brian McElroy - 4/19/2006

Question
I am building my first home and I will be the Gen. Contractor. I am told when I get a bid I should tell the tradesman that I want a certificate of insurance before they start the job.
What is this?
  Thanks,
    Joe

Answer
Joe, first, if you are going to be your own general contractor, there is a lot to learn. First of all, if you tell most tradesmen and suppliers that you are going to be an owner/contractor, your prices will be significantly higher than hiring a General contractor who enjoys contractor discounts.  Subcontractors lie in wait for first timers like spiders in a web... So first, tell all the subs and vendors you are building your first home and may build many more. They will treat you better on pricing. You may also want to register as a sole proprietor and use a fictitious name to look like a builder.  Also, I recommend making good friends with a Builder so you can compare costs to protect yourself.  

Next, you should have a Certificate of Insurance from all tradesmen and suppliers that will be on your property, even if only as a delivery driver. Subcontractors are required by law to carry general liability and worker's comp insurance. In order for you to be protected, their insurance companies need to issue a certificate naming you as an additional insured and loss payee in the event of an accident. You also need  to have them complete an independent contractor's affadavit. This insures they are not an employee and you cannot be held to paying their social security benefits. Some file claims like this after they complete a job.

As the property owner, you are responsible if a subcontractor gets injured, or injures someone else. The certificate shifts the liability to the licenseholder. If they do not provide this in this manner, do not use them.  Also, you should have an agreement with the subs to dictate how your job will be run, how to handle payments, scope of work for the job, and much more.  Building is a serious business.

Additionally, you will need a builder's risk insurance policy to protect the building in hte event of theft, fire, wind, etc. You homeowner's insurance company may provide this. Make sure replacement is for labor AND materials in the event of a loss.

If you want to e-mail me seperate from this panel, I will forward copies of the documents I use in Florida. The laws may be different in other states. My e-mail is mcelroybuilder@aol.com.  

I hope I have helped.
Brian McElroy