The pitfalls in acting as one's own general contractor in the construction of a dwelling resulted in liability on the part of an insurance agency for failure to provide coverage to its client for a major exposure.

It was apparent from testimony that the enterprising property owner was not familiar with workers compensation law and his responsibilities. He had discussed his plans and insurance needs with an employee of the insurance agency when making arrangements with various subcontractors and self-employed construction workers. He told her of concern about people wandering around the premises during the construction period and the possibility of injuries.

Their conversations, as recalled in testimony, indicated a lack of knowledge on his part of the risks he assumed for work done by carpenters, plumbers, plasterers and others that he hired.

In answer to the agency representative's question whether they were insured, he recalled saying "....I really don't know who is insured and who is not."

A homeowners policy, containing the standard workers compensation exclusion, was arranged for the applicant. The exclusion and the need for workers compensation insurance were not discussed. A workman was injured during the course of construction. Claim against the insured was denied by the homeowners insurer on the basis of the pertinent exclusion.

The Oregon Workers Compensation Board ruled that the "do-it-yourself" home builder was a non-complying employer who was responsible for paying for the man's injuries. The insured sued the insurance agency for not arranging workers compensation insurance and for not advising him of the need for it. He appealed a trial court judgment in favor of the agency.

The insurance agency, on appeal, argued that it did not have a duty to secure workers compensation insurance nor to explain the need for it, because the insured did not ask for it. The agency did not, at the time, "sell" or have facilities for workers compensation insurance. Customers who wanted it were advised to contact the State Accident Insurance Fund. Such advice was not given in this instance.

The appeal court noted that the conversations between the insured and the agency representative made clear that questions asked and information provided placed a duty on the agency to procure workers compensation insurance and to explain that the homeowners policy provided did not include it.

The judgment of the trial court was reversed in favor of the client and against the insurance agency.

(CADDY ET UX, Plaintiffs-Appellants v. SMITH, Respondent-Appellee. Oregon Court of Appeals. Nos. CV92-0100 and CA A78258. July 6, 1994. CCH 1995 Fire and Casualty Cases, Paragraph 5101.)