Serving on a community association's board of directors is not a task to be taken lightly as it involves overseeing the maintenance and operation of the community as well as keeping up the community's good reputation. An essential part of this is ensuring that areas of the community which are the association's responsibility are properly maintained and serviced by reputable, licensed service providers. But how do you go about choosing service providers to complete maintenance tasks in your community? And how do you know they're trustworthy, appropriately insured, and qualified to do the work? This is where it's crucial to have a proper service provider certification process in place.
Professional community management companies like CAMS not only have longstanding relationships with reputable service providers but also, on behalf of the association, enforce the qualifications that must be met before service providers are entered into CAMS’ service provider database. Why have these stringent regulations? Having unqualified or uninsured service providers performing work in your community exposes the association to liability whether it be through the service provider's actions or contract terms. If exposed to liability issues, your association and its membership could be held legally responsible and subject to financial damages or penalties - something you'd undoubtedly rather avoid.
Choosing Service Providers
Though board members and associations certainly have every right to choose whatever service providers they'd like to complete work in their communities, one of the benefits of partnering with a management company is that you gain access to their service provider list. These service providers have proven over time that their work standards are consistent, that they are reliable, and offer value to their customers. Not only that, but many professional management companies such as CAMS have a service provider certification process to screen service providers for the appropriate insurance and credentials. CAMS maintains a database of service providers so that we may quickly provide our board members with a pool of pre-vetted service providers who perform a variety of services.
The Importance of Confirming Service Providers are Properly Licensed & Insured
When your association chooses to use a service provider, board members have a fiduciary duty to the association to check into the service provider's background, licensing, and insurance. If a service provider is unable to provide proof that they're properly licensed and insured, you probably need to find a different service provider.
Why is this such a big deal? In most states, service providers who provide services or labor are required to not only carry some kind of specialty license in their field but also have proper insurance coverage in a certain amount. So, if they're missing one of these puzzle pieces, it's pretty likely they're missing all of them which exposes your association and its membership to a great deal of liability should there be an injury or property damage while this service provider is on your property. In other words, if they or someone on their team gets injured or causes damage to the association's property, you're going to be the one getting the bill.
Another thing board members should be wary of when considering service providers is artificially low bids - if a service provider is providing estimates that are much lower than others, there's probably a reason. They could perhaps be inexperienced, not intending to finish the work as promised or planning to increase the cost as the job goes on. Much like hiring an unlicensed or uninsured service provider, going with the cheapest option without doing your due diligence could end in liability exposure for the association.
CAMS' Service Provider Certification Process
One of the tasks CAMS is charged with in managing the communities they serve is the administration of service provider compliance on behalf of the association. In short, this means making sure that all service providers have provided a W-9 (where applicable), a certificate of insurance (general liability coverage) and proof of workers' compensation insurance to CAMS before they will be paid.*
Not only does CAMS require proof of all proper coverage, but insurance expiration dates are also monitored through our system, and reminders are sent to service providers when these dates approach so that they may provide updated policy information. Though we cannot control any coverage lapses that may occur throughout the year, keeping abreast of expiration dates helps ensure that the service providers working on your property are adequately insured.
As stated earlier, boards have the right to waive these requirements if they so choose, but experts strongly advise against it. Requiring proof of proper insurance, including workers comp, is an integral part of your association's risk management strategy as it reduces the association's liability exposure. If your board is considering making such an exemption, it is encouraged that you discuss it with your attorney and insurance agent prior to making a final decision. CAMS requires boards waiving these requirements to execute a waiver of liability to acknowledge that CAMS advised the board of the risks of exempting a service provider from compliance and to release CAMS from any potential claims.
If your board has any questions or concerns about hiring properly licensed and insured service providers, please reach out to your CAMS community manager today for trusted guidance.
*CAMS does not screen service providers for licensing and CAMS requires only proof that insurance is currently in force. The amount of insurance is not determined by CAMS, it is left up to the service provider to consult with their insurance agent. If the board wishes to establish certain thresholds for coverage, or to verify service provider licensing, this should be stated in the Request for Proposal document and verified by the body that will approve the bids and award the contract.