Additionally, because the association knowingly hired an uninsured vendor, not only can they end up having to pay the vendor, they end up paying for the damages caused either through the association’s insurance policy or funds. Clearly not a good deal for the association.
What starts out to be a simple, inexpensive project can conjure up entire deck of liability and expenses for the association. This is why a board should never hire a vendor that does not have proper license and insurance.
Consider the following scenario: Suppose the association needs a plumbing repair and has several bids they are considering, the least of which is for $1,000. A resident recommends a family friend that needs extra income help his kid pay for college. The family friend has plumbing skills, time to do the job, and is willing to do the job for $500. However, he doesn’t have Auto, General Liability, or Workers Compensation insurance. The board decides to hire the family friend anyway because they want to help the guy out and they rationalize that the plumbing repair is minor so it’s a bonus to get it done for half the cost. The illusion begins.
Obtaining proof of auto insurance may not seem relevant to a plumber fixing a pipe, but it is. The plumber will likely drive to the association the day he comes to make the repair. Suppose he is pulling on to a driveway, becomes distracted and crashes through a condominium. Even though he is clearly at fault, he has no insurance. The resident of the unit is clearly not at fault. Since the damages are extensive, it does not make sense for the association to make the repairs out of pocket. The association must file a claim on its own insurance and has a $5,000 deductible. The cost of the plumbing repair just became $5,000+ to the association.
Assume the plumber arrives safely and without incident to make the plumbing repair. As he assesses the scope of the repair, he realizes he will need to solder the pipes. A spark from his blow torch ignites a nearby drapery and causes a fire. Since the family friend does not have General Liability insurance to reimburse the association for the damage his actions caused, the association becomes responsible. Again, the association will need to file a claim and bear the expense of the $5,000 deductible. Not to mention, the unit owner effected is extremely upset because not only are they displaced from their home, they have incurred unforeseen expenses such as additional living expenses and the deductible on their individual policy. The property manager will also need to charge for the additional time they will spend coordinating with the insurance adjuster and contractors. Luckily, no one was injured. The cost for this repair just skyrocketed far beyond $500.
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Now assume the plumber arrived safely without incident and started the pipe repair. The plumber convinced the board that it doesn’t matter that he doesn’t have Workers Compensation insurance because he is working for himself and has no employees. As a matter of law, this may be true, but it does not mean the association has no exposure if he injured himself. Suppose that while soldering the pipes, the plumber severely burns his hands, requires a skin graft, and can’t work for several weeks. This means, he will not be able to earn a living while he is recovering. The college tuition payment and other bills still need to be paid. At the time of hire, neither the plumber nor the board imagined that an
f 46 | COMMON INTEREST® • Spring 2019 • A Publication of CAI-Illinois Chapter f CAI Illi i Ch t
injury could occur during a simple $500 plumbing repair, but it just became very real for the plumber. He decides to pursue workers compensation benefits from the association because after all, the association is a corporation and they hired him. Perhaps the judge will view the association as a general contractor and him as their subcontractor and require the association to pay workers compensation benefits. The aggravations and unknowns in this scenario might have been avoided if the plumber had workers compensation insurance.
If a board is aware of these things, they can avoid the illusion of a seemingly good deal. It is always recommended that a board obtain guidance from professional sources like their property manager, attorney, or insurance agent when hiring vendors. Choosing a vendor, unlike choosing a card, should not be left to the luck of the draw. Since property managers work with all types of vendors on a daily basis, they can share their experiences with the board as to the quality of work and price from certain vendors. When it comes to awarding a plumber with a job for a pipe repair, the property manager has likely worked with dozens of plumbers over the years. The property manager can recommend several plumbers that have the resources, the quality and reliability of workmanship, and fair pricing for the services being performed. All of this information is very useful and necessary for the board to consider as it reviews the received bids.
More than this, the most important thing the property manager can attest to is that the vendor is properly licensed and insured. Because the manager regularly works with all types of vendors, they are constantly obtaining proof of any necessary licensing and proof of valid and proper insurance. Each time an association decides upon a vendor, the manager collects this information on behalf of the association. The manager knows that a professional vendor will not only have necessary licensing, but also the insurance coverage and limits needed to cover any damages or mishaps they may cause while working at the property. The property manager can also confer with legal and insurance professionals to be sure the vendor’s credentials and insurance are appropriate, adequate, and that the deck is stacked in favor of the association.
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