INSURANCE & LIABILITY - Things to know before hiring a company...

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Check insurance yourself. Home Reports recommends hiring properly insured companies. The only way to determine if the contractor you are planning to hire has insurance is to request that the contractor's insurance company(ies) send(s) directly to you a copy of the insurance certificate(s). The certificate(s) should have your name as the certificate holder, so that if the insurance policy is cancelled before the expiration date, the insurance company(ies) will notify you of the cancellation. Because some contractors have actually forged such documents, you should never accept a copy of an insurance certificate directly from the contractor. A typical insurance certificate lists the types of insurance the contractor has through the company, including policy number, effective dates, and policy limits. Two key insurance types to look for are general liability and workers' compensation. If either of these sections is not completed, the contractor does not have this type of insurance coverage through the certificate-issuing insurance company. Click here for a sample insurance certificate.

Home Reports only checks the insurance of Best Pick Companies. However, as outlined in the legal disclaimer on the inside front cover: "All statements concerning insurance, licenses, etc., are informational only and are historical as of March 21, 2008. Since insurance and licenses can expire and can be cancelled, homeowners should always check such information for themselves."

Tort liability

In addition to a workers' compensation claim, an injured worker may be able to make a tort claim against the homeowner. While a workers' compensation claim is limited to hospital bills, wages, and disability, a tort claim has no limitation. Tort claims result from either active or passive negligence on the part of the homeowner. Active negligence results when the homeowner does something that contributes to the accident, such as lending the worker a tool or holding the ladder. If the tool injures the worker or if the ladder falls, a tort claim may exist. Passive negligence results when the homeowner fails to do something, like warn the worker of a known danger, such as a hole in the yard. If the worker gets hurt falling into the hole, the worker may be able to make a tort claim against the homeowner.

To limit tort liability exposure, homeowners should always warn workers about any known hazards, should never lend tools to workers, and should never help workers.