Vendor Insurance

00:00:00 Speaker: It's time for AMG's Community Leader Series Podcast Edition. Over the last three decades, AMG has worked to make the role of community leaders more effective and less of a headache. Podcast topics are a response to what our executive board members have requested.

00:00:17 Paul K. Mengert: Welcome everyone. This is AMG Community Leaders Series Podcast. Our topic for today is Vendor Insurance. And I'm very pleased to have the President of AMG, Dacy Cavicchia as our special guest.

00:00:31 Dacy Cavicchia: Thank you, Paul. It's truly a pleasure.

00:00:34 Paul K. Mengert: You know, I've had the honor and privilege of working with Dacy over close to the last 30 years, but neither of us are really that old. But Dacy, It's Truly great to have you with us on this podcast today. For those of you who don't know Dacy very well, let me tell you. In addition to her skill in handling and maneuvering through a lot of complicated and difficult situations, she holds the CMCA, the AMS and the prestigious PCAM designations from the Community Association Institute. Dacy works with all of our AMG offices and leads our team of over 50 people in overseeing all aspects of community management, but one of the things I know she's really been focused on this year is implementing some new programs related to vendor insurance. Dacy, welcome to the podcast.

00:01:36 Dacy Cavicchia: Thank you, Paul. This is a subject very, very near and dear to my heart, very important to me. We've had several discussions of what keeps us up at night. Vendors being properly insured is going to be one of those huge, big topics that we talk about.

00:01:54 Paul K. Mengert: Well, explain to our listeners what you are talking about when we say vendor insurance.

00:02:01 Dacy Cavicchia: Well, when a homeowners association hires a vendor to do work in the community, whether it's landscaping or pool companies doing small repairs, large repairs on the pool cabanas or the townhomes or condominiums, the vendors themselves need to carry insurance for their companies. Two of those big insurance policies is their liability policy and their worker's comp policy.

00:02:34 Paul K. Mengert: Well, see, give us some examples of when would a vendor use a liability or a worker's comp policy, because the somewhat of a misnomer is vendor insurance is like a warranty on their work, and that's something different than what you're talking about.

00:02:50 Dacy Cavicchia: Absolutely. Liability insurance is a situation that could be used where if the vendor causes damage to the common elements that they're working on, for example, if they are wiring a clubhouse, and for some reason, there's an electrical issue and there's there could be a fire in the community. Workers comp could be if there's a roofing company replacing the roofs or shingles out in the community and their employee falls off the roof. So, worker's comp is personal personnel issues. Liability is structural.

00:03:39 Paul K. Mengert: So, what if a cleaning service comes in to clean the clubhouse and they leave the oven on, and the clubhouse catches on fire? Would that be liability insurance?

00:03:48 Dacy Cavicchia: Yes, that's exactly what that would be, that would cover any structural issues.

00:03:53 Paul K. Mengert: What I give that example, because sometimes this isn't complicated work. They can lead to complicated damages. I know we talk about with worker's comp, somebody's falling off the roof, but suppose they're driving their car through the community, and they have an automobile accident or run off the road. I mean, that could be a worker's comp claim, I suppose.

00:04:21 Dacy Cavicchia: Absolutely. That is frankly, the most concerning issue with vendor insurance. It doesn't necessarily have to be the big jobs. It could be the small jobs where somebody is putting flowers in at the entrance, and they have a shovel and they dig too deep and they hit an electrical line. That could be for the lighting at the at the community. So, there are several different things that that there's scenarios where you think it would be the easy enough job, those are the ones that could potentially cause serious damage.

00:05:01 Speaker: And now it's time for an AMG Community Leader Series newsbreak.

00:05:06 Newsbreak: An HOA in Myrtle Beach, South Carolina upsets the only black homeowner in their community after painting her designated parking space numbers black. The homeowner states the HOA recently painted the parking spaces in white and noticed hers were the only ones painted in black. She contacted the HOA immediately and stated the board members she spoke with showed no concern at all. The HOA is excuse was maintenance most likely ran out of white paint. Let us know how you would react by leaving a comment at HOACommunityleaders.com.

00:05:36 Paul K. Mengert: Dacy, Unbelievable. How could something possibly like that be done?

00:05:42 Dacy Cavicchia: I have no idea in today's day and age how something like this could happen and why it would ever be considered.

00:05:53 Paul K. Mengert: It just seems reprehensible to me. But I do know after having done this for 30 years, get all the facts before you pass judgment. But if it says this smells, it certainly seems pretty rotten to me. Anyhow, we're back. And I'm Paul K. Mengert with special guest Dacy Cavicchia here discussing the vendor insurance program. Dacy, tell us more about vendor insurance and why it matters. I know you had a story about a plumber that burned down the building.

00:06:31 Dacy Cavicchia: Yes. Yes. And the things that when we talk about what keeps us up at night is things that have actually happened and trying to communicate that to our board members. We had a situation where a plumber was working on a line in the ceiling of a pool building and the pool building connected to a clubhouse, and they were trying to weld the pipes back together and it actually caught the installation on fire and the building burned to the ground. We can only be thankful there was no one in the building at that time. There could be a very similar instance if an electrician was working on a light in a clubhouse, leaves the property, everything looks fine, and then the community rents, the clubhouse, turns on the lights, and while the party’s going on, the clubhouse catches fire. The chances of things like this happening become greater and greater. And if they have insurance, if the vendors maintain their insurance, the chances of this are far less likely to be the responsibility of the HOA.

00:07:53 Paul K. Mengert: Well, you know, one of the ones that I remember is that a landscaper throwing a rock out of the mower and hitting a little boy in the head with a rock. Fortunately, as I understand it, he recovered from his injuries, but it was certainly a scary situation. And when you look at how much damage could you do, you know, a lot of times the vendors want to have a minimal amount and the manager in the association's asking for a higher amount. These are the kind of reasons that I think your managers are asking and insisting on higher amounts because we've seen bad things happen and we want to protect our clients from those.

00:08:36 Dacy Cavicchia: Absolutely and there's absolutely nothing wrong with different types of vendors having different limits on what is the acceptable minimum. A pool company, You know God read that we remember the Virginia Grand Baker situation and the entire act going into place because of that child and the situation was the suction was too strong. But nonetheless, when things like this happen. Companies, landscapers, roofing companies, their limits just have to be higher because they are they have the most exposure as opposed to a cleaning company.

00:09:21 Paul K. Mengert: Well, you know, very sadly, an 18 year old lifeguard was electrocuted in Raleigh because there's some defect with the swimming pool. So, you know, it's just very important that these insurances be in place and are there to protect the members of the association that could be exposed to these hazards, because if the vendor insurance isn't there, they're going to be looking back to the to the association.

00:09:57 Dacy Cavicchia: Absolutely. And that's one of the things that I try to impress the most with our board members. If there's $5 million worth of damage and the contractor only has $1,000,000 of liability policy, where's the rest of that money going to come from? The vendor only has what he has, and by signing his contract, you accepted that. So, to make sure that the policies stay in effect, which is something else we can talk about a little bit, but when we want to make sure they have enough that they stay in effect for the duration of the contract, these are things that that we need to do to protect our assets and our association members.

00:10:47 Paul K. Mengert: Right, right, right. Well, what are some of the techniques that you see being used? I mean, I know in the old days we used to have people mail us certificates of insurance, and then we got them faxed over and I suppose sent in by email. But I understand there's some new services that help protect the association by compiling and monitoring the insurance.

00:11:12 Dacy Cavicchia: There are many different third party vendors that will do independent verification whereby they contact the insurance companies themselves. There are third party vendors that are independent companies that will do a verification process with the insurance companies directly. They're supposed to be notified if there is a lapse in coverage, cancellation of coverage so that they can let us be notified. One other thing that the third party vendors will do is if you have a large contract going on, for instance, a roofing project where you're having all of the buildings being reroofed, at the point that you make each payment to the vendor, you can contact the third party verification company to ensure that they have the proper insurance prior to issuing payment.

00:12:21 Paul K. Mengert: And I know this sounds incredible, but I know we have personal knowledge of at least one case where a vendor or his or her insurance agent faked a certificate of insurance.

00:12:36 Dacy Cavicchia: Yes.

00:12:37 Paul K. Mengert: You know, I don't know exactly what happens with that, but when there are potentially millions of dollars of damage potentially out there, you don't want to be dealing with a fake certificate of insurance.

00:12:50 Dacy Cavicchia: And I've also heard cases where the vendor themselves have modified. And with today's day and age and the technology that's out there, it's why you want to talk to the insurance company specifically, as opposed to just having the vendor send over their paperwork because they can modify the start and end dates.

00:13:11 Paul K. Mengert: And Dacy, if the certificate just says liability. Is that enough? Will that mean is that enough? Or do you also want that worker's comp?

00:13:22 Dacy Cavicchia: We absolutely need the workers comp as well. And in some states, it might not be mandatory by the state. Each homeowner’s association should be insisting on this because there are too many chances that an employee could get hurt, an employee of the vendor, not the employee of the association or the management company, but the employee of the vendor could get hurt. And the word that I yell the loudest about is not sufficient, is a waiver of insurance being signed by the vendor is not sufficient when something tragic can happen.

00:14:11 Paul K. Mengert: Right. Well, the waiver signed by the owner of the company won't necessarily work as a waiver for all his or her employees. And you know, what happens from what I've heard is an employee gets hurt or the guy helping the guy who's doing the gutter cleaning gets hurt. And they're hurt bad enough that when they bring a lawsuit, though, the family members say, hey, one of the board members came out and told him what to do or how to do it. And, you know, maybe the association or the manager loaned him a ladder or a leaf blower. These are things that can make that person seem like an employee of the association. And if they're an employee of the association, the association becomes liable. So that's just that's just incredible.

00:15:03 Dacy Cavicchia: Absolutely. Absolutely.

00:15:06 Speaker: It's time for another AMG Community Leader Series newsbreak.

00:15:10 Newsbreak: A homeowner in Palm Harbor, Florida, awaits HOA's help after her property insurance company went into receivership. She reports finding heavy mold in her recently acquired apartment and opens a claim with her property insurance company that goes into liquidation shortly after. After receiving $2,000 from the Florida Insurance Guaranty Association. The homeowner still needs about 17,000 to complete the work. Her claim becomes one of the thousands that the FIGA had to pick up from companies that had gone under. Months later, the homeowner is still waiting for the HOA’s help covering some of these costs. Go to HOAcommunityleaders.com to read the full story.

00:15:46 Paul K. Mengert: Welcome back folks this is Paul K. Mengert discussing vendor insurance with AMG President Dacy Cavicchia.Dacy, I think people probably really are having a little bit of eye-opening experience, understanding that they could become liable as an association or maybe even board members if the vendor's insurance isn't right. Tell us about how that could happen, and have you seen that?

00:16:21 Dacy Cavicchia: Well, I have seen that and it is of the utmost importance for the board members to realize that these programs that we're having today and the third-party vendor, vendor verification programs are in place to protect them and their members. Saving a dollar today, or saving $200 because this vendor's less expensive, is not worth the amount of exposure that the association has When situations can go wrong. Where there are situations, there are times when I hear on the regular, well, we can save money if we go through this gentleman. He says that they don't have to have insurance. There's only three of them, but they can come out and cut down the trees. No problem. The risk that a company that is cutting down a tree could cause either property damage to the buildings themselves or to the people that are climbing the trees and dropping the limbs is beyond comprehension why anybody would want to put their own association at risk like that and therefore all of their members.

00:17:50 Paul K. Mengert: Yeah, this is often really done with the best of intentions. We can save X number of dollars by using, you know, a little old Johnny to do this work. We know he doesn't have insurance, but it's only going to be $85 and, we get somebody else it may be $200 or $300, $500. Look at what we're going to save. But the risk could be seven-digit money and it could be not only to the association, it could be to the members of the association. There are cases where actions have been filed against the individual members and even against the board members personally. So while we certainly want to work to help community leaders find the most attractive rates on anything that needs to be done, we got to make sure they're protected because this is an awfully slippery slope where you can get involved in, you know, the unforeseen happening, you know, the rock flying out of the mower, the oven getting left on in the clubhouse. I mean, these are things that can happen for very small amounts of work that can be extremely damaging and frankly, take the focus off of the main work of the association of preserving, protecting, enhancing the community. All of a sudden you're embroiled in years’ worth of legal fighting.

00:19:13 Dacy Cavicchia: Absolutely. There was a situation where we had a building being completely reroofed and the construction requirements of a gas line being so far away from the roof itself. Yes, that's absolutely what it should have been when they were putting that they were hammering the nails and putting the boards back on, they hit a gas line in the structure itself. Can you imagine what kind of damage that would have caused if it had been done by someone who didn't realize it was happening? Was it pulling the permits? Didn't have the proper insurance? and it could have been, you know, the the vendor Suzy up there, hammer in the nail in there, not even realizing that she hit the gas line if she wasn't listening for the hits. You know, the experienced licensed insured vendors know what to look for, know what to listen for. It's just not worth it.

00:20:22 Speaker: And now our final AMG Community Leader series Newsbreak.

00:20:26 Newsbreak: The City News reports a billionaire developer in New York City agrees to pay $330,000 to the condo board after failing to disclose major gas piping issues after converting the rental units to condos. The board president and two other members reportedly filed a complaint back in March of 2019 after a gas leak in the building raised concerns about the developer's transparency and proper maintenance management. The HOA will put the settlement towards the reserve fund and homeowners will now receive free gas stoves. The developer must also pay another $150,000 in penalties to the state. To read the full story and leave a comment, visit HOACommunityLeaders.com

00:21:05 Paul K. Mengert: Dacy we're back. Give us your final thoughts on vendor insurance.

00:21:11 Dacy Cavicchia: It's of the utmost importance to the board members, to the association members, that their hiring licensed, ensured, companies that have the proper amounts of liability and worker's comp. A second thing they need to do to make sure that they're doing is verifying that the insurance is valid. That is the board members responsibility to make sure that their vendors are properly insured. And third, if the vendor isn't insured, it's not worth saving $100, $1,000. Make sure that you're protecting your members against lawsuits and high money damages.

00:22:01 Paul K. Mengert: Dacy. Thank you. I am Paul K. Mengert with the AMG Community Leaders series talking about vendor insurance today. Three takeaways for you. Make sure you're using licensed and licensed insured vendors, make sure you've verified their insurance, and saving a buck may not be worth it in the long run. A bonus one: make sure they've got a liability and worker's comp. Hundreds of times I've seen vendors come in and say, Oh, we're fully insured but not have worker's comp because it's expensive. But it's a huge exposure for community associations. So, this is Paul K Mengert and Dacy Cavicchia are with you on the AMG Leaders series. Thank you for all you do for your communities. And call us any time we can be of assistance.

00:22:56 Speaker: Thanks for listening to AMG's Community Leader Series Podcast Edition. Find more information on this episode online at HOACommunityLeaders.com. This podcast is a production of Big ed Group. Darren Sutherland Executive Director. Jacob's Over the Line Director. Matt Golden News Director. Jen Raising Director, Producer. And Jason Jentera audio producer. All rights reserved.

• To protect Board Members and Association Members, make sure that you are hiring licensed, insured companies with the proper amounts of liability and worker’s comp insurance.

• Always verify that a vendor’s insurance is valid.

• Remember that no amount of money saved is worth the risk of hiring an uninsured vendor.

Black Woman in Myrtle Beach Upset After Parking Space Number is Only One Painted Black

A HOA in Myrtle Beach, SC upsets the only black homeowner in their community after painting her designated parking space numbers black. The homeowner states the HOA recently painted the parking spaces in white and noticed hers where the only ones painted in black. She contacted the HOA immediately and says the HOA reportedly showed no concern at all. The HOA’s excuse was that maintenance mostly likely ran out of paint.

Florida homeowner without insurance while trying to close previous mold claim

A homeowner in Palm Harbor, FL awaits HOA’s help after her property insurance company went into liquidation. She reports finding heavy mold in her recently acquired apartment and opens a claim with her property insurance company, that goes into liquidation shortly after. After receiving $2k from the Florida Insurance Guaranty Association (FIGA) the homeowner still needs about $17k to complete the work. Her claim became one of the thousands that the FIGA had to pick up from companies that had gone under. Months later, the homeowner is still waiting for the HOA’s help covering some of the costs.

Developer to pay $330K settlement to condo reserve fund

The City News reports Billionaire condo developer in New York City agrees to $330k to Board after failing to disclose major gas piping issues after converting the rental units to condos. The Board president and two other members reportedly filed a complaint back in March 2019 after a gas leak in the building raised concerns about the developer’s transparency and proper maintenance management. The HOA will put the settlement towards the reserve fund and homeowners will now receive free gas stoves. The developer must also pay another $150k in penalties to the state.