What Homeowners Insurance Does NOT Cover

Contractors Cutting Corners Can Cost You Plenty

Drip . . . drip . . . drip . . .

            Diane walked into her kitchen one afternoon and stepped into a growing pool of water. It took her a moment to realize that the leak was coming from a recessed light in her ceiling.

            “I knew I had trouble,” she laughed later, “but I had no idea what kind of nightmare I was about to endure.”

            Diane checked her homeowners association’s Web site for a plumber. One of her neighbors had recommended a plumber on the Service Providers List, so she felt confident calling and setting up an appointment.

            The plumber who came to fix Diane’s leak was nice enough. During the course of the repair, he slipped and fell on the slick floor, but he quickly assured Diane that he was fine. She thanked him and said goodbye—the leak was fixed, the bill was paid, and she didn’t give it another thought.

            Months later, though, Diane received a subpoena. The plumber who had slipped on her kitchen floor was suing her for $200,000 for medical costs and “loss of profession.” Diane was horrified—she’d had no idea anything was wrong, and she felt like she was being taken advantage of. She called her lawyer for advice.

            Over the next two years, Diane fought the plumber in court. She couldn’t sleep at night, and her hair began to fall out. It ended up costing her $127,000 out-of-pocket.

            “I trusted my homeowners association,” Diane lamented.  “Wouldn’t you expect an HOA to recommend only properly licensed and insured service providers? I had no idea I was putting myself at risk by hiring someone they recommended, and I was shocked to find that California law was so stacked against homeowners.”

Why wasn’t I covered?

            Diane’s HOA had recommended a plumbing contractor who cut corners by not paying Workers Compensation insurance for his employees. This left Diane legally responsible for her plumber’s accident. But Diane’s insurance, like most homeowners insurance policies, did not cover the contractor she hired.  Homeowners insurance usually only covers domestic employees like maids and babysitters. Most homeowners do not realize that they are personally liable if an uninsured worker is injured on their property.

California law is very clear:

            It is the homeowner’s responsibility to verify that repairmen and contractors are properly licensed and insured. If a homeowner hires a worker who does not carry the appropriate liability and Workers Compensation insurance, the homeowner is liable if an accident happens.  

 

You don’t have to do the paperwork.

            Diane came to me a year later when she needed air conditioning repairs. She was more thorough than anyone I’d ever met.  Diane asked for copies of my licenses and insurance certificates. I was happy to provide them, but I let her know that there is an easier way to make sure a contractor is properly licensed and insured.

The Contractors State License Board makes it easy to check your service providers.

1. Go to CSLB.ca.gov

2. Search for service providers by business name, a worker’s name, or a license number.

3. Find out whether the contractor is properly licensed and insured, and whether they pay workman’s compensation for their employees.

One thing even licensed contractors lie about:

            The Contractors State License Board may show that a company is exempt from paying workers compensation insurance, but that’s only true if the owner of the company is its only employee. Even licensed contractors lie about this from time-to-time. I know many talented air conditioning contractors, but not one of them can lift an AC unit onto a rooftop alone. Every HVAC contractor should carry workers comp, but many of them do not.

Why don’t all contractors carry Workers Compensation coverage?

            Workers compensation coverage is expensive. A contractor who cuts costs by skipping it can offer a much lower price than a contractor who insures his employees properly. As people who have gone through Diane’s ordeal know, however, a very low bid can turn into a very expensive nightmare.

Homeowners associations can protect their members from irresponsible contractors.

Most of the time, accidents do not happen. But when they do, homeowners are ultimately responsible for what happens on their property. Fortunately, homeowners associations can easily protect their members from irresponsible contractors by checking the credentials of the service providers they recommend at CSLB.ca.gov.

Dean Gilford is a licensed and insured HVAC, Electrical & GeneralBuilding Contractor in Los Angeles and the San Fernando Valley. He can be reached at dean@kilowatthvac.com.