A COI May be Insufficient When Granting Access to Your Property

The owners of buildings in Manhattan often cannot perform maintenance or repairs without gaining access to their neighbor’s property. While the law requires the neighboring building (known as the “licensor”) to grant such access, it may be conditioned upon reasonable terms and conditions, which would include requiring that the owner of the building needing access (known as the “licensee”) to provide proof that licensor (and its officers, directors, agents and employees) are named as additional insureds on the liability policies carried by the licensee and the contractor performing the work. Proof of such insurance is almost universally given – and accepted – in the form of an Accord Certificate of Liability Insurance (“COI”). Licensors who grant access  by casual reliance on the COI, however, are  taking an unnecessary risk.

It is a good practice for the licensor to request that its insurance broker review the certificates of insurance for the licensee and licensee’s contractor.  A COI is issued by an insurance broker – not by the insurance company — and the insurance company will not be bound if there is an error in the COI or the COI is inconsistent with the terms of the insurance policy. The broker may ask to review the endorsement to the policies or the actual policies themselves to confirm that the licensor can be covered by the policies, to determine whether there are any material exclusions in the policies affecting coverage for any claims, as well as the financial viability of the insurers. A licensor can also request that licensee provide an Accord New York State Construction Addendum to the COI which will provide more information about a contractor’s insurance than is provided on the COI.

A building owner/licensor should not permit access without a written “license agreement,” which specifies that the licensee and its contractor will name the licensor as an additional insured on licensee’s policies and provides for a broad indemnification in favor of licensor. Many commercial liability insurance policies will only cover additional insureds where that obligation is contained in a written contract between the named insured and the additional insured.   In that regard, the license agreement should mandate that the agreement between the licensee and its contractor name the licensor as an additional insured on contractor’s policies and, to be safe, the license agreement should provide that licensor is entitled to review such contract as well as a COI issued by the contactor’s insurance broker or such other information as requested by licensor’s insurance broker.

The licensor can demand that the licensee deliver a specific endorsement issued by the insurance company that confirms coverage in order to avoid any uncertainty as to whether the licensor and its representatives are covered as additional insureds under the policies maintained by the licensee and its contractor.  An insurance company will usually require a fee of around $500 for the endorsement, which can take anywhere from several days to a month to issue. In order to avoid any delays, a licensee seeking access to enter upon licensor’s property should be advised as soon as possible that endorsements (as opposed to a just a COI) will be required and the specific additional insureds that should be listed thereon.

Finally, the COI can (and should) indicate whether the policies have any deductibles and/or whether the policies carried by the licensee or its contractor permit a waiver of subrogation against the additional insureds.  All commercial general liability policies do not have identical terms as various endorsements to the standard “CGL” policy can have a material effect on the extent of coverage. For example, if a contractor has a policy with a general aggregate limit of insurance of $2 million, the COI should disclose whether the contractor has an endorsement that makes the full $2 million limit of liability available for claims against licensor, or whether the $2 million limit of liability can be eroded by claims against the policy regarding other projects undertaken by the contractor.

Scott Greenspun is a Principal at Braverman Greenspun, a law firm dedicated to representing Boards of Directors and Managers of Condominiums and Co-ops in the metropolitan New York City area. Over the firm’s 50-year history, we have served as general counsel to hundreds of properties and developed broad expertise in litigation, transactions, leasing, financing, and the governance issues facing cooperatives and condominiums. One of the first firms in New York to specialize in this practice area, Braverman Greenspun provides some of the most sought-after counsel in the industry.