by Paul F. P. Pogue

When Angie's List member James Bluemle of Sugar Grove [Ill.] hired a contractor to repair his gutters, he knew he'd need permission from his town house association for the exterior work.

But he didn't know his neighborhood covenant required him to ask the contractor to list the association as an "additional insured" on the company's liability insurance - to provide the association an extra layer of third-party damage protection in case anything went wrong.

He says it delayed his gutter job until he could find a contractor to provide the necessary paperwork. "The contractors I talked to didn't seem to have a complete, full understanding of what was needed," Bluemle says.

Highly rated insurance agents in Chicago recommend that individual homeowners as well as those who live in neighborhood associations regularly ask contractors for additional-insured endorsements because contractor liability insurance may cover less than they think.

Andy Dolliff, agent with highly rated Lakeview Insurance Agency in Chicago, says homeowners could be held responsible for third-party damage, even with a properly insured contractor. "If a contractor cuts into a water main and is sued by your neighbors for subsequent damage, the homeowner could be held responsible," Dolliff says. "When [any homeowner or association is] named as an additional insured, the liability is first on the contractor's policy.

"It's advisable to get an additional-insured statement in all cases," he adds. "You're more vulnerable if you don't have it."

Chicago-based insurance attorney David Roe says homeowners should at least ask for the endorsement on any job that requires a permit, involves structural work or might come near a neighbor's property. "The endorsement provides indemnification and covers the cost of legal defense if you're sued," he says.

An insurance certificate isn't sufficient. "A certificate of insurance states at the top that it confers no benefits," Roe says. "It might even have your name followed by a hyphen that says 'additional insured,' but that doesn't matter. You want a schedule that actually modifies the insurance policy. The important point is the document says 'This person or entity is an additional insured,' and lists the correct name."

Joel Davis, regional marketing director of Community Association Underwriters of America, says insurance companies charge either no fee or less than $100 to provide an endorsement. "Most contractors just consider it part of the cost of doing business," he says.

Mike Lynch, owner of highly rated HandiCo in Chicago, says he rarely receives requests for endorsements, except from associations and property management companies, but has no problem providing them. "We just email our agent with the information, and they send it back to us to forward to the customer," he says.

Janet Patrick, hotline director for the Illinois Insurance Association, recommends discussing the endorsement with an attorney or insurance agent. "Attorneys tend to seek compensation from everyone involved when serious injury occurs," she says. "This endorsement gives the homeowner an added layer of protection."

Bluemle says he eventually got the job completed, but still worries about the complexities. "My impression is that this is a very confusing area," he says.