MIAMI MIRROR – TRUE REFLECTIONS 

 

MYSTERIOUS CERTIFICATES OF INSURANCE Why does the Building Department require them?
September 18, 2012 By David Arthur Walters THE MIAMI MIRROR Miami Beach City Attorney Jose Smith, citing the City Charter, declined to take steps, unless expressly asked to do so by city officials, to protect the city and building owners from potential risks associated with building contractor submissions of fake, expired, invalid, or insufficient insurance certificates of insurance in order to obtaining building permits. He apparently believes there is no risk associated with their acceptance inasmuch as he said the city has no liability for permitted private construction projects. In order to obtain a building permit, the City of Miami Beach requires contractors to submit a certificate of liability insurance made out to the City of Miami Beach, the insurer having liability for no less than $300,000 per accident or occurrence for bodily injury, and $50,000 per accident
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for property damage. The contractor must also show evidence of workman’s compensation insurance or a state exemption. As we know, the lack of workman’s compensation insurance became a scandal during the building boom as scores of injured employees, especially undocumented workers, discovered their employers did not have them covered. We reminded Mr. Smith that we were in possession of evidence that a certain renegade general contractor had a tendency to forge certificates of insurance and submit them to unsuspecting owners of building projects and building managers, and, if caught, to obtain certificates from an agent for insurance that would be invalid in any event because he happened to be an unlicensed contractor. Besides that, the policies themselves might exclude coverage necessary for the risks being taken. We suspected that this contractor might not hesitate to deceive the city in respect to insurance and other matters as well. We repeatedly alerted Building Department officials to the risks and suggested that insurance companies actually be contacted to verify that adequate insurance was in force for each master permit application. Insurance companies may agree to notify the certificate holder if the policy has lapsed or has been cancelled, but that is not a certainty. Further, we suggested that a fresh copy of the certificate for each master permit be initialed, submitted and retained in the permit application file for future reference as evidence, to make sure the coverage was checked and that there had been no fraud. Our suggestions were futile as they were professedly unwarranted by the purpose for submitting certificates of insurance in the first place. Tony Gonzalez, the Building Department’s operations manager, responded to our queries and suggestions, intimating that the certificates of insurance bearing the City of Miami Beach as “Certificate Holder” does not imply that the City itself is covered by the insurance: it is only evidence that the insured has insurance. Indeed, no matter whom the Certificate Holder is, the standard form warns in bold capital letters that the issuance of the certificate does not imply any contractual relationship whatsoever with between the insurance company and the Certificate Holder. So the certificate, for which several hundred dollars is charged per Certificate Holder named, is apparently meaningless except as a confirmation that the insured is insured. That is why the Certificate Holder, if protection is wanted, should check out the policy and be added to it by way of a rider. “The City’s responsibility is to ensure that the contractors are insured and that the policy is active, period,” Mr. Gonzalez said. “Verifying the amount of coverage is the responsibility of the contractor, property owners and/or their legal counsel. On government projects the City is usually added onto the underlying policy (a “rider”) as an additional insured and is listed as such on the Certificate of Insurance…..” Furthermore, “licensed insureds provide a Certificate of Insurance to the City. The certificate is not the actual policy or contract and only serves the purpose of providing a statement of information about the policy. We update the information in our permitting system from the certificate. The certificate covers the contractor at all project locations until the policy/certificate expires…. We do not store copies of Certificates of Insurance; the certificates are simply used as a basis to update our database with limited policy information under the contractor’s file…. there are no clauses or ‘riders favoring the City in the Certificates of Insurance provided by contractors.”
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If what Mr. Gonzalez said is true, that the city has no responsibility whatsoever because everyone else is actually responsible, and that the city is not protected by a contractor’s additional insurance rider except on government projects, then getting policy information for all permits applied for by a certain contractor until the policy is said to expire, is merely a perfunctory ritual without meaning or substance except that it makes officials feel good. We attempted to get Mr. Smith to explain why a certificate of insurance without a rider naming the city as an additionally insurance is required at all: “When the city does not require a contractor on a nonpublic project to make the city an additional insured on each building project, then why require contractors to provide a single certificate for all jobs until expiration with the city named on it? Does the city have a potential liability for permitted work that its own insurer requires it to get evidence of contractor insurance, or is the city requirement just a ritual without legal consequences?” “The city never has liability on a private construction job,” he responded. “As to what is or is not required for licensing or permitting, you need to ask the building director or the county building code compliance office.” “They know what is required,” we responded. “That is a certificate of insurance showing general liability and workmen’s compensation coverage naming the city on the certificate, but without any additional insured rider, but they do not know why it is required. If it does not protect the city since the city is as you say never liable for jobs it permits, then why the requirement? Nobody seems to know the answer including Director Stephen Scott and Operations Manager Antonio Gonzalez.” We are standing by for a response at press time. We would be astonished to know that the city is never liable for incidents on a job it permits. It would seem that not only the owners and contractors, but the city who issues the permits as well, could be sued for accidents, negligence, and misconduct, so if the contractor were not really covered, their risk would be even greater. We know that the state licensing law requires contractors to provide affidavits attesting to the fact that they are insured when they apply for and renew their licenses. We see nothing in the Florida building code on this subject, but if permit issuing agencies such as the City of Miami Beach are required by state law or regulations to subsequently get evidence of insurance from each qualifying contractor in order to protect owners, and fails to corroborate that the kind of insurance required is in place, would it not be responsible for the uninsured damages? How would we laymen, who do not have the legal resources at our fingertips and the training to understand them, know the true nature of such legal complexities? We turned to Mr. Smith, hoping that he would help us educate the public on the matter, but he would not substantiate the Building Department official’s legal stance for us because he believes that giving his opinion would constitute giving legal advice to a private party. And he could not say anything about it to his client, the municipality and its officers, unless specifically asked to do so. Nevertheless, we had persisted with the city attorney all along, not only in respect to certificates of insurance, but by calling to his attention other misbehavior of the “renegade” contractor, some of it believed to be fostered by a faulty permit review process of his office, which will be the subject of yet another article because we have reason to believe that the city has potential
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liability for its negligence in respect to permitting and inspections. For example, we note that according to the Florida building code, when owners choose to substitute a private inspector for a public one, they must indemnity the local agency, and the local agency may require that certificates of insurance be provided. And what if city officials ignore the fact that an unlicensed contractor is paying off licensed contractors to get permits while he and his crew did all the work? The contract with the licensed contractors is, “You sign the papers for this fee, and I and my crew do all the work.” What then if the unlicensed general contractor, whose name does not appear on any of the documentation, does shoddy work or is negligent and causes property damage and personal injury and deaths? Would the injured parties not sue the city? An unlicensed, de facto general contractor on millions of dollars of contracts in the cities of Miami Beach and Miami has claimed to all within earshot that his persistent violations of all sorts of regulations are normal for contractors: “Everybody does it.” His claim may be accurate, at least in respect to one of the largest developers in Miami Beach whom we are currently investigating. So to say that he is a “renegade” contractor is not particularly damning if outlawry is permissible. He does appear to be the creature of a negligent, lax, and perhaps corrupt regulatory milieu, something that we thought the city attorney would be intensely interested in, therefore we kept him apprised of our investigation of several projects, reported in our series, ‘Getting Ahead of The Job Con.’ For example, lacking a license and wanting to obtain a permit for a major construction project, our exemplary unlicensed contractor had his trusty permit fixer line him up with a licensed contractor to sign a permit application to demolish an imaginary bathroom and kitchen in a void penthouse at Sunset Harbour, where the unlicensed contractor proceeded, with his regular crew, and without supervision by the contractor on record, to build out the apartment pursuant to a million dollar contract with the owner, an out-of-town real estate speculator for whom he had done another but smaller build-out without any permit at all. Our persistence with the Building Department led to a stop work order being issued but only after nearly $400,000 in work had been done. The permit fixer lined him up with another contractor to pull a legitimate permit, but that contractor has filed a withdrawal. A condominium building manager at a completely different location had kicked out the unlicensed contractor’s crew because the manager had checked out the certificate of insurance put up by the licensed contractor for the purpose, and discovered there really was no workman’s compensation insurance in force. That might mean that the certificate of insurance provided on the new permit application for the Sunset Harbour may have been invalid. Another application may be filed to complete the work at Sunset Harbour, reverting to the original licensed contractor who hired out his license. We believe the work may have continued despite the stop work order. In the interim, pending the approval of an expensive master permit, yet another easily obtained demolition permit has been applied for in order to gain official access. Some time ago, we alerted the Florida Attorney General, the Florida Department of Business and Professional Regulation, the Florida Department of Law Enforcement, the City of Miami Beach Building Department, the City Attorney, and the Miami Beach Police Department of a possible conspiracy to defraud the city of its right to permit fees and to protect the community from hazards, all to no avail. We asked Joe Centorino of the Miami Dade County Commission on Ethics and Public Trust, formerly head of the State Attorney’s public corruption unit, for his advice in the matter; however, without looking at the evidence we had, he said we had
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insufficient evidence for the State Attorney to even be interested. Therefore we went public at considerable risk in order to protect the city. Alas that our efforts have been deemed an “attack on the city.” As we have seen, a false certificate of insurance would apparently be of no great moment to the Building Department given its official current policy, but we took the matter up again with Mr. Smith. We refreshed his memory about how easy it is to Photo Shop certificates of insurance. It is even easier to fill in the blanks of the Acord form available on the Internet, stamp or initial it with the agent’s mark, and submit it to whomever. Owners seldom check it or even know what it means. Some licensed property managers know what it means and do check out the certificates, while others are “taken care of.” We noted that a college instructor who teaches construction law said that falsification of certificates of insurance may be a felony. Therefore someone must take them seriously! But fake certificates seem to be produced countless times every day to get into buildings and save a few hundred bucks doing so. After all, when there are no consequences for dummying up documents, they become nothing but a nuisance to be dispensed with out of hand. “You may recall my conversations with the Building Department in respect to taking precautionary measures,” we addressed Mr. Smith, “in respect to general liability and workmen's compensation insurance, and that I tried to impress staff with the need to check out the insurance information provided with the carriers for validity and extent of coverage (watch out for exclusions) for each permit, and to make sure the insurance is still in force and not revoked for nonpayment of premiums etc. I figured that might be the duty of a Building Department clerk or especially a law clerk. I received in return an education on what was presently being done.” “This is within the Building Department’s purview,” he responded. “I understand. My hope is that Building or Legal will verify coverage on review of permit application under advice of the city attorney. Mind you that I proceed to ask questions with evidence in hand e.g. fake certificates. Condo building managers who are diligent and honest catch many forgeries.” He cited the City Charter, which he said prohibited him from taking actions not specifically requested by city officials: “Under our system of government (see City Charter), these are administrative issues which fall under the purview of the city administration, not the legal department. We give advice when requested.” “Yes, I have read that provision several times and wanted to rewrite it but still some provisions are subject to interpretation and there is always the common and the divine law. I do believe you have the power to instruct you review staff to check to make sure policies are in force and make that check-off part of the application file.” Mr. Smith’s stance is pursuant to a general policy we have heard about before, after private citizens made suggestion for improvement to legal processes; to wit: that it is not his job as the city’s lawyer to make improvements to legal processes unless his client asks him to take action i.e. give advice. His misunderstanding of his duties under the Charter has broad ramifications for the residents of our great city on the beach.
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Article III of the Charter provides, first of all, that it is the duty of the city attorney “to act as the legal advisor for the municipality and all of its officers in all matters relating to their official powers and duties.” If Mr. Smith were on your payroll as your company’s general counsel, what would you do if you discovered that he was ignoring all sorts of perils to your business because he thought he could take no action as your legal advisor unless he was specifically asked to do so by you or your officers? If they could care less, then so should he, until the company goes down the tubes while you are out to lunch. Of course an attorney may limit the scope of his representation of a client, but this attorney is our house counsel, and our house, according to its mission statement, is “committed to providing excellent public service and safety to all who live, work and play in our vibrant, tropical, historic community.” Furthermore, the Rules Regulation the Florida Bar provides that, “a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social, and political factors that may be relevant to the client's situation.” Even when the scope of representation is strictly limited, the Bar’s Commentary states that a lawyer may initiate advice: “A lawyer ordinarily has no duty to initiate investigation of a client's affairs or to give advice that the client has indicated is unwanted, but a lawyer may initiate advice to a client when doing so appears to be in the client's interest.” Therefore we believe that not on the city charger but professional ethics permits and even recommends a proactive, independent-minded city attorney who will represent the city inclusive of all its residents. ##

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