Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 4 minutes
Key Takeaways
- General contractors (GCs) should ensure subcontractors have their own insurance to minimise liability risks during projects.
- Subcontractors typically need general liability and workers’ compensation insurance to protect themselves, especially when required by contracts or law.
- Gaining proof of insurance from subcontractors is crucial; GCs might request a Certificate of Insurance (COI) before project commencement.
- Verifying a COI involves checking for authenticity, ensuring coverage meets contractual obligations, and confirming agent information.
- USA Business Insurance can assist GCs in finding appropriate insurance coverage for themselves and subcontractors.
As a General Contractor, when working on a job, you should consider that things could go wrong during the project. Liability exposure is a major part of the job, and if something does happen, your insurance coverage will likely be involved.
Subcontractors that you work with usually have their own insurance policy for their business operation, especially when contracts, clients, or state law require it, but legal requirements vary by jurisdiction and the agreement/contract they have. Subcontractors typically need to carry their own general liability and workers’ compensation policies to protect themselves and satisfy GC contracts.
Why Should Subs Have Their Own Coverage?
While general liability may not be mandated by law in all states, workers’ comp and commercial auto insurance may be required by state laws and regulations. That being said, it is a best practice for general contractors to require subcontractors to have their own insurance policy to protect themselves from liability when accidents occur that are in the subcontractor’s scope of work.
With subcontractor insurance coverage, subcontractors are protecting themselves from high costs. Think about injuries related to dangerous work. If something may go wrong, huge legal fees and settlement amounts may be on the horizon. And we’re talking big, if a pedestrian suffered a severe injury.
As a GC, though, you care less about the protection it affords the subcontractor and more about the transfer of risk aspect. You want the subcontractor’s insurance to protect you and the owner when something goes wrong with the subcontractor’s work. No one wants to be left holding the bag when an accident occurs.
The best way to ensure that this is the case is by adding requirements to a tightly worded contract. As the GC, you should require your subs to provide proof that they’re duly insured. You may request proof of a COI before allowing your subcontractor to start the project.
How Can I Verify A COI?
Request the COI directly from the subcontractor’s agent or broker to confirm that the subcontractor is not forging the COI to get the bid. The general contractor may be left on the hook if the subcontractor’s insurance coverage is not verified and there is no adequate coverage in place. Make sure your business is listed as an additional insured as required by contract. In addition, you may request waiver of subrogation, primary non-contributory and 30-day notice of cancellation endorsements.
Many companies use an ACORD form as evidence of insurance. The font and spacing should be consistent throughout. There shouldn’t be blurry words or odd-looking fonts that look out of place.
You could also check the carrier’s rating on the AM Best website. Also, make sure that the subcontractor’s agent’s information is fully complete on the certificate.
And if you’re still not sure, reach out to the agent directly. Use the phone number provided on the COI. You can ask the agent about policy exclusions or any questions you have about the policy. You can also confirm the coverage limits. You can even ask about any specific endorsements.
Trust USA Business Insurance For Your Commercial Insurance Needs
As a GC, you’ve got enough on your plate. Whether or not you are properly insured should be a big concern for you. Thankfully, the team at USA Business Insurance is here to help you find the right coverage. And if one of your subcontractors is in need of coverage, we may help them, too, by placing them with the right carrier based on their insurance requirements.
