What to Do in Case of a Subcontractor Not Having Liability Insurance

Contractors often hire subcontractors to handle various aspects of a construction project. Prior to entering such an agreement, it’s imperative to know about liability insurance for subcontractors. Lack of the right insurance is risky when a subcontractor makes a costly error. Here are essential points to know about the type of insurance a subcontractor should provide.

What Is Subcontractor Liability Insurance?

Similar to general liability insurance used by various businesses, liability insurance for subcontractors covers risks such as injuries and damages to third parties. Not only does the coverage protect the subcontractor, but it also protects the contractor as well. If a visitor to the job site gets hurt and needs to see a doctor, this coverage pays the medical bills and loss of income.

Consider setting a solid policy that in order for a subcontractor to work for you, they must present proof of insurance. The best way to speed up this process is to use software with compliance tracking features. It’s helpful to send email reminders to subcontractors when their insurance falls out of compliance. Your firm should accept documents that prove compliance via email.

Are Subcontractors Required to Carry Liability Insurance?

As a contractor, you need to make sure your subcontractors carry the right insurance associated with job risks. The responsibility of an accident falls on the contractor if the subcontractor is uninsured. There are various ways a subcontractor can bring a contractor legal trouble if work isn’t performed properly to meet industry standards and the needs of the client.

While general contractors are required by states to carry general liability insurance, subcontractors are not bound to do so. At the same time, large reputable contractors tend to avoid partnering with uninsured subcontractors.

If a Subcontractor Fails to Carry Liability Coverage

Suppose you need to hire subcontractors quickly due to the urgent need for filing a labor shortage. You may decide to soften your requirements on subcontractor insurance in the short term. An option to still ensure they are covered is to add subcontractors to your general liability insurance policy, if possible. Not all policies allow for this coverage flexibility beyond the policyholder.

Another option to consider for ensuring your subcontractors have the proper insurance coverage is to place funds in a surety bond. This amount reflects your coverage limit that pays for accidents caused by subcontractors.

When an uninsured subcontractor accidentally drops a hammer from a roof and it hits someone on the head, there could be a lawsuit. It becomes somewhat of a legal blur as to who is responsible for an accident when the relationship between a contractor and subcontractor isn’t bound by a contract. In some states, a subcontractor is treated like an employee who works directly for the contractor.

Be aware that in certain states a contractor is responsible for a subcontractor’s negligence. That’s another reason why you should demand your subcontractors carry relevant insurance.

Make Sure Your Entire Ecosystem Is Covered

Do you want to make sure you’re aware of all your insurance options regarding subcontractors? If so, get in touch with our team here at Artisan Insurance Solutions and learn more about liability insurance for subcontractors.

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