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Insurance and the Residential Contractor
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Minnesota Community Living January/February 2010

Insurance and the Residential Contractor

By Tony Poetz, Production Supervisor, New Exteriors by SMA, Inc.

One of your mottos as a property manager is: plan for the best and prepare for the worst. This approach is an important part of your daily routine. When your association decides to launch a construction project, preparing for the worst becomes critical. That’s not to say that construction companies are guaranteed to make mistakes. On the contrary, they’re in your ballpark because they’ve shown that they can be trusted with a project of your scope. However, their work is complex and an overlooked aspect can turn into an expensive recovery. So what can you do to prepare for the worst? Know everything there is to know about construction project insurance.

For starters, there are state minimums required of construction companies of a certain size. The Minnesota Department of Labor states that residential building contractors, remodelers and roofers that earn more than $15,000 per year are adherent to the following insurance limits*:
1) Liability — at least $100,000 per occurrence, $300,000 aggregate limit for bodily injury, and property damage insurance with limits of at least $25,000.

2) Workers Compensation — Minnesota Workers’ Compensation law states all employers are required to purchase workers’ compensation insurance or become self-insured.


An important note about these laws is that they are minimums. Many contractors carry millions of dollars worth of coverage depending on the size of their projects. In the case of a 100 unit townhome project, the standard settings will likely be around $1 million to $3 million dollars for liability and workers compensation.

And how do you check this? Any contractor company worth its salt will either have an updated document with them or can have their insurance agent send you a copy within 24 hours. Don’t be afraid to ask for proof of insurance. This is one method of separating the good contractor from the bad. If there is any resistance to providing documents or the response is taking too long, treat it as a red flag in your decision process. Also, subcontractors are subject to the same minimums, but don’t need to carry as much as the general contractor. Don’t be afraid to ask for their documentation as well.

Insurance is important in nearly every aspect of your management position. With the escalated responsibility of a construction project, coverage is essential. It’s easy to provide your project and your association with a safety net. All you have to do is stick to your motto by preparing for the worst as you plan for the best.

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