CHOOSE YOUR HOME CONTRACTORS WISELY

Homeowners regularly hire general contractors and subcontractors to work on their homes but are often unaware of the large exposures that could result in hiring an unlicensed or uninsured contractor, particularly for large projects. For example, an uninsured roofer working on your home may sue you for damages if he is injured on the job. The following key rules should thus be followed when selecting a contractor to work on your home.

• Be wary of contractors who solicit business door-to-door or via cold calls. In addition, avoid contractors who quote you a price that will automatically go up the next day or week if you don't accept it immediately.
• Obtain recommendations from friends, family members, and neighbors about experienced and reputable contractors who have performed excellent work for them.
• Ask for a written estimate from the contractor that includes any oral agreements the contractor makes in this process. The estimate should contain a line-by-line breakdown of costs, including materials and labor.
• Verify that the contractor is licensed, bonded, and properly insured. Ask for certificates of insurance for workers compensation and general liability policies. You should also receive these certificates for any subcontractor the general contractor may hire to work on your home.
• Contact the Better Business Bureau to see if complaints have been filed against the contractor. This can be performed via the bureau's Web site at http://www.bbb.org/.
• Get a copy of the proposed contract. Ideally, it should include a hold harmless clause in your favor, particularly for major work such as when heavy equipment will be used in constructing a swimming pool. A hold harmless clause specifies that the contractor will indemnify you with respect to your liability to members of the public who are injured or whose property is damaged during the course of the contractor's operations. The contract should also explicitly establish an independent contractor relationship.
• Ask a knowledgeable friend, relative, or attorney to review the home repair contract before you sign

AVOIDING CONSTRUCTION DEFECTS THAT CAN DESTROY YOUR HOME

I have a friend who lives in a five year old manufactured home. About a month ago, He called me during a rainstorm because he couldn’t get his breaker box to quit tripping and cutting the power to half of his home. I thought he might be overloading the circuit, so we unplugged everything; but the breaker still tripped. I walked outside and saw an outdoor outlet on the side of the home. Making sure that the breaker was switched to the off position; I opened up the outlet and discovered that it was full of water. The weather seal had failed and the outlet was shorting out because of the heavy rain collecting inside. We didn’t have a replacement outlet at the time, so I capped the end of each wire with wire nuts and wrapped them in electrical tape.

My friend called me yesterday evening to help him install the replacement outdoor outlet at his home. In the process I noticed that the work box that housed the electrical socket was stripped where the screws went in to hold the new outlet securely to the home. I removed the work box and found a scary problem. The original installer of the work box didn’t ensure that other wiring was out of the way and the metal wings that hold the work box secure against the home had nicked the insulated housing of another wire when it was installed. Over the past five years, that nick just sat there. However, during the rain storm, when water entered the housing, the water must have entered the housing of the wire, causing it to short out and much of the insulation on the housing melted and burned away. No doubt, this time bomb was just waiting to burn down their home.

Thank heavens the original work box had been stripped, otherwise this problem would probably not have been caught in time.

Since this was a manufactured home, my friend was very detatched from the construction process of his home and unable to do anything to prevent this type of occurrence. However, there are steps that can be taken to avoid poor workmanship in the future.

• If you don't know how to conduct a repair or a new additon, do not perform the work yourself. Hire a professional contractor.
• Conduct a background check on any contractor you hire. Ask them for names of clients they've done similar work for in the past and then call those clients to see how they feel about the work that was performed. You may also wish to ask your contractor for a resume.
• Ask contractors for their credentials. Having special training or certifications that qualify them for the work that is to be performed generally results in a better outcome.
• Watch the work that as it is being done and feel free to ask questions. While this may not make you their best friend, contractors are less likely to take shortcuts when they are being observed.
• Hire a qualified inspector after the project has been completed to certify that it was done correctly. It is preferable to have the inspection done before you pay the contractor.

Remember that contractors are human and no matter how careful they are, defects can still occur. Additional steps can be taken now to help you in case you later experience trouble due to a construction defect.

• Ask the contractor for their license and verify that they are the qualifier on the license. Ask if any complaints have ever been filed against them.
• Verify that they are bonded for at least the value of the work they will be performing. While a performance bond won't pay for faulty workmanship, it can pay if the contractor leaves before the work is completed or if they fail to pay their suppliers. It is also a token that they are a respectable contractor, since bond companies don't typically issue bonds to contractors they don't trust.
• Ask the contractor to name you as additional insured on their liability insurance policy while they work on your project and obtain a certificate of insurance from their insurance company. Verify that their liability limit per occurrence is no less than $1,000,000.00.
• Verify that the contractor obtains any necessary permits for the work they will be performing.

Another topic worth mentioning is workers' compensation. It is possible that if someone is hurt at your home while performing work for you, the ensuing lawsuit may name you as a defendant. Verify that your contractor has a current workers compensation insurance policy and make sure that everyone who will be performing work is included in the policy. This should even include the general contractor. Obtain verification of this in writing.

RISK MANAGEMENT STRATEGIES FOR HIRING DOMESTIC WORKERS

More and more homeowners in the United States now employ domestic workers, either on a full-time or part-time basis. In fact, the U.S. Census Bureau estimates that there are at least 1.5 million domestic workers across the country. The services these domestics render are great, but so are the risks for the employer. The following are some ways for you to mitigate the risks of employing domestic workers and for ensuring that these workers have the proper protection as well.

• If hiring a domestic worker directly, run a background check on potential domestics to see if they (a) are U.S. citizens, (b) have a history of filing lawsuits, (c) have credit problems, or (d) have a criminal record. If using an employment agency, verify the above steps are performed. Prospective domestics with major concerns of these types should not be hired.
• Check with your insurance agent to see if you need to procure workers compensation coverage. Your agent will be familiar with your state laws concerning this issue. Of course, you may choose to voluntarily provide workers compensation coverage, which may be a good idea. As discussed below, even if your homeowners policy covers injuries to your domestic employee, the policy limit could be grossly inadequate in the event of serious injury, permanent disability, or death.
  The advantage of workers compensation coverage is that it provides broader protection (e.g., disability payments) than your homeowners policy, including unlimited medical expenses in most states. So, even if not required by law, it is a good idea to consider voluntarily providing this important coverage.
• If an outside firm or agency is used to hire your domestic, verify the worker has workers compensation coverage. Obtain a certificate of insurance from the employment agency on an annual basis showing this coverage.
• Prepare a well-organized and documented human resource file for every domestic employee. In addition, you should have an employment application as well as an employment manual or handbook. This manual will reduce the chances of an employment-related lawsuit because it can include protective provisions detailing your opposition to any employee mistreatment. An employee manual written or revised by an experienced attorney is an even more effective risk control recommendation.
• If there are multiple domestic workers, an employment practices liability (EPL) policy may be needed. This coverage can protect you from a wide variety of lawsuits, including allegations of discrimination, wrongful termination, harassment, and slander. A personal injury endorsement under your homeowners policy is also recommended.
• Discuss with your insurance agent the possibility of increasing the personal liability and medical payments limits under your homeowners policy to the highest available limits, particularly if workers compensation benefits are not required or purchased. A personal umbrella policy is also recommended.
• Consider some type of fidelity bond for these employees, particularly for new employees. This bond will protect you if the domestic worker commits a dishonest act in your employment (e.g., theft of jewelry). If an employment agency or service provides these employees, verify that the employment agency has purchased fidelity bonds on them and ask for a copy of the bond certification form.
• Make sure that your employment practices comply with federal requirements, such as the withholding of payroll taxes and proof of citizenship.