Insurance and Indemnity in Association Contracts: What to Require, How to Verify It, and What Section 725.06 Limits

Jason Hamilton Mikes, JD, MBA
Founder & Managing Shareholder

• Published September 25, 2026
• Reviewed by Jason Hamilton Mikes, JD, MBA, September 26, 2026
• Florida Statutes as of July 1, 2026
• Applies to: Condominiums · HOAs · Cooperatives

The insurance and indemnity paragraphs are usually the last thing a board reads and the first thing that matters when something goes wrong. They decide who pays when a worker falls off a ladder, a supply line lets go, or a resident sues over an injury on a job site. Getting them right costs one careful review before signing. Getting them wrong costs a deductible, a defense, and sometimes a judgment your own policy will not cover.

The two paragraphs do different jobs

An insurance requirement points the risk at a company whose business is paying claims. An indemnity clause points it at the vendor. A board that treats the two as interchangeable ends up with the weaker one.

Indemnity is a contractual promise: if the association is sued because of something the vendor did, the vendor will defend and pay. That promise is worth exactly what the vendor is worth. A two-truck landscaping company cannot fund a serious injury claim, and it can dissolve in a week.

Insurance is worth what the policy says, subject to the exclusions, the limits and the deductible. It is the stronger protection because a licensed carrier stands behind it. But it reaches the association only if the association is on the policy, which is a separate step most boards skip.

Require both. Write the indemnity so it is enforceable, then require the insurance that funds it, and require proof that the association is actually covered rather than merely mentioned. Our guide on reviewing a vendor contract covers the rest of the agreement.

Coverage to require, by kind of vendor

No statute sets required limits for association vendor contracts. The limits are a business decision, informed by the size of the job and the association's own insurance program. What follows is a starting point, not a rule of law.

Two adjustments matter more than the headline number. Ask whether the general aggregate is shared across all of the vendor's jobs or dedicated to yours: a $2 million aggregate spread over forty properties is not $2 million. And on a project of any size, require that coverage continue through the completed-operations period, because a roof or a balcony repair fails long after the crew has left.

Additional insured is not the same as certificate holder

This is the most common and most expensive mistake in the file. Certificate holder is an address line. It means the vendor's agent will mail you a copy of the certificate and, in theory, tell you if the policy is canceled. It gives the association no rights under the policy at all.

Additional insured status is created by an endorsement to the vendor's policy. It makes the association an insured for liability arising out of the vendor's work, which means the vendor's carrier owes the association a defense as well as coverage. In a suit by an injured worker or a resident, that defense obligation is often worth more than the policy limit, because defense costs start immediately.

Ask for two things. First, that the association be named as an additional insured by endorsement, using the exact legal name of the association, not the management company and not "the Board of Directors." Second, that the endorsement cover both ongoing operations and completed operations. Those are separate forms, and ongoing-operations status alone disappears when the crew drives away, which is precisely when latent defects surface.

Primary and non-contributory, and waiver of subrogation

Every liability policy contains an "other insurance" clause telling it how to behave when more than one policy covers the same loss. Left alone, two policies typically share pro rata, which means your policy pays part of a claim the vendor caused, and your carrier sees that loss at renewal.

Primary and non-contributory language fixes that. It requires the vendor's policy to respond first and to give up any right to demand contribution from the association's policy. It belongs in the contract as a requirement, and it belongs on the endorsement as an actual term. A contract requirement with no matching endorsement is a promise the vendor's carrier never made.

Waiver of subrogation runs the other direction. After your insurer pays a claim it steps into the association's shoes and may sue whoever caused the loss. That is usually fine. It becomes a problem on a construction project, where the association wants the work finished rather than the contractor sued, and on workers' compensation, where the injured worker's carrier can pursue the association as the property owner. A waiver in the contract, matched by an endorsement on the vendor's policy, closes both. Confirm with your own agent before waiving the association's subrogation rights, because doing it without the carrier's consent can create a coverage problem of its own.

Workers' compensation and the exemption problem

Section 440.02(10) defines the construction industry broadly: for-profit activities involving building, clearing, filling, excavation, or substantial improvement in the size or use of a structure or the appearance of land. Most of what an association hires falls inside it.

Small contractors routinely hand over a certificate of election to be exempt instead of a certificate of insurance, and boards accept it because it looks official. It is official. It is also not coverage. Under section 440.02(18)(b)2., construction-industry officers may elect out only if each owns at least 10 percent of the corporation and is listed as an officer with the Division of Corporations, and no more than three officers of a corporation or affiliated group may be exempt. The certificate is valid two years under section 440.05(6).

So the exemption covers the owner of the company and at most two other officers. It says nothing about the three people on the roof, and if those three are employees they are supposed to be covered. The Division of Workers' Compensation maintains a public database where exemptions and employer coverage can be checked by name.

Section 440.10(1)(b) makes a contractor who sublets work the statutory employer of the subcontractor's employees unless the subcontractor secured payment of compensation, and section 440.10(1)(c) requires the contractor to obtain evidence of coverage or of a valid exemption before the sub starts. The practical rule for a board is simpler: require a certificate of workers' compensation insurance from every vendor who puts a human being on the property, and treat an exemption certificate as a reason to ask who else is on the crew rather than as an answer.

How to actually verify a certificate

Verification is a ten-minute clerical task that the manager can do and the board should confirm was done. The steps, in order:

1. Check the named insured against the contract. If the contract is with ABC Services LLC and the policy insures ABC Holdings Inc., the coverage does not follow the work.
2. Check the policy period against the contract term. A one-year certificate on a three-year contract means two renewals you will have to chase.
3. Check the limits, and ask whether the general aggregate is per project or shared across every job the vendor has.
4. Ask for the additional insured endorsement pages, not just the certificate, and read the wording that describes who is covered and for what.
5. Ask whether the carrier is admitted in Florida. A surplus lines carrier can be perfectly sound, but it is outside the Florida Insurance Guaranty Association backstop if it becomes insolvent.
6. Calendar the expiration dates with a reminder thirty days out, and make renewal certificates a condition of the next payment.
7. Keep the certificate, the endorsements and the contract together. Contracts for work to be performed are official records under section 718.111(12)(a)11.e. and section 720.303(4), and bids for work must be kept for at least one year.

One caution about cancellation notice. Certificates commonly carry language suggesting the carrier will notify the holder if the policy is canceled, and that language has usually been edited down to nothing. Section 627.4133 governs what an insurer owes its own insured on a commercial policy, generally 10 days' notice for nonpayment of premium and 45 days for nonrenewal, but it does not make your association a party. If notice matters, make it a contract obligation of the vendor.

Indemnity clauses and the limits section 725.06 places on them

Florida restricts how far an indemnity clause can reach in construction contracts. Section 725.06(1) provides that a clause requiring one party to indemnify another for damages caused in whole or in part by the indemnitee's own act, omission or default is void and unenforceable unless the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any. The statute adds that the monetary limitation on indemnification provided to the owner of real property by a party in privity of contract with that owner may not be less than $1 million per occurrence, unless the parties agree otherwise.

Read that twice, because the consequence is counterintuitive. The broad, unlimited indemnity clause that looks strongest is the one most likely to be thrown out. A clause with a stated dollar cap that made it into the bid documents is the one that survives. If your association is doing concrete restoration, roof replacement, or any repair work inside the statute, the indemnity number belongs in the specifications before bids go out, not in a signature-day redline.

The statute reaches construction, alteration, repair and demolition work. Whether a routine landscaping or janitorial agreement is inside it is a closer question, and the answer can change how the clause should be drafted. That is a question for counsel on the particular contract rather than a rule a board can apply from a checklist.

Section 725.08 limits what a public agency may demand from a design professional, capping it at damages caused by the design professional's own negligence, recklessness or intentional misconduct. A community association is not a public agency, so section 725.08 does not cap what your association may ask its engineer to indemnify. Engineers will negotiate hard on that point anyway, and their professional liability carriers often refuse broad indemnity outright. See our guide to engineering and construction contracts for how that negotiation usually resolves.

Whatever the clause says, back it with insurance. An indemnity from a company with no assets and no contractual liability coverage is a promise you will collect by suing an empty shell.

Your own side of the ledger

Vendor insurance supplements the association's program; it never replaces it. What the association itself must carry differs by chapter more than most boards expect.

The gap that catches HOA boards is the absence of any statutory floor. Nothing in Chapter 720 tells an HOA what property or liability insurance to buy; the declaration does, and declarations written in the 1980s often describe a community that no longer exists. Review the coverage against the current common areas. Our guide to documenting an insurance claim covers what happens after a loss.

When the vendor will not budge

Sometimes the answer is legitimate. Professional liability policies generally do not add additional insureds, so an engineer who declines is telling you the truth. The substitute is a certificate showing adequate per-claim and aggregate limits, a requirement that coverage be maintained for a stated number of years after completion, and an obligation to notify the association if it lapses.

Often the answer is not legitimate. Adding an additional insured to a general liability policy is routine, inexpensive, and something every commercial carrier does. "My carrier will not do that" usually means the vendor has not asked.

If the board proceeds anyway, do it deliberately. The options, roughly in order of preference:

• Shorten the term so the exposure has an end date, and reassess at renewal.
• Reduce the scope so the vendor is not performing the risky part of the work.
• Require a performance or payment bond in place of the missing coverage.
• Hold back a larger retainage until the warranty period has run.
• Increase the price the association is willing to pay a properly insured competitor, and go with that competitor.

Whatever the board decides, put the decision and the reason in the minutes. A director who accepts a lesser insurance package after weighing the trade-off has exercised business judgment. A director who never noticed the gap has not. Our guide on fiduciary responsibilities explains why that distinction decides most claims against boards.

Contact Hamilton Mikes

Hamilton Mikes reviews the insurance and indemnity provisions in association contracts for boards throughout Lee, Collier and Charlotte Counties, from a routine landscaping renewal to a multimillion-dollar restoration agreement, and works with the association's agent so the contract and the policies actually match. Call 239-594-7227 or visit our Contract Management page.