By: Joseph Lalla, Account Executive
Georgetown Insurance Service, Inc.
Silver Spring, MD
We previously wrote an article on the importance of making sure contractors who work on your home and/or property are insured properly. The same basic principle rings true for general contractors when selecting subcontractors. If you fail to properly vet your subcontractors, you could find yourself on the hook financially and your reputation in shambles.
Why is it important for my subcontractors to be insured?
As the general contractor on any job, you assume relative responsibility for the entire project. This includes not only management aspects, but also the teams you hire. If you fail to hire subcontractors with proper insurance, you could easily find yourself footing the bill for a variety of different lawsuits or claims. These claims could include property damage, bodily injury, and even pollution. It is considered a best practice to require that every person working on a project be covered by a liability policy.
If they don’t have coverage, you could be sued and potentially held liable in court for damage or injury regardless of who was responsible. Your own GL policy will only cover claims resulting from “your work,” not the work of a subcontractor.
What should I ask my subcontractors to provide?
Prior to starting any job, you should request to see proof of insurance from each subcontractor involved. You should look for four things: General Liability, Limits, Auto Insurance, and Workers’ Compensation.
Subcontractors should not only have general liability insurance, but also adequate limits that accompany it. What good is a liability policy if it won’t cover much of anything? A good rule of thumb is that their limits should be comparable to your own. Depending on the nature of the project, you may also want to request proof of pollution liability insurance. Confirming auto insurance coverages in the event they hit your car, house, persons, or pets should be on your list to verify as well. In addition, ensure your subcontractors have Workers’ Compensation coverage that covers their team. If they don’t, you could find yourself taking the hit for any injuries that occur to their team members.
Last but not least, require your subcontractors to name you as additional insureds on their general liability policies. This will help protect you if you get sued for something related to the subcontractors’ work.
These requirements should be considered commonplace prior to starting any project or entering any new agreements. Many general contractors will even write these stipulations into their own agreements as part of the contractual engagement, with a risk transfer agreement in place.
Protect Your Reputation
As a general contractor, your reputation is always on the line. While it may be appealing to hire the cheapest contractor or the one who is available right then and there, that may not be the best idea. Enter agreements with vetted, reputable, and reliable subcontractors who both you and your client can trust. Their work will directly reflect on you.
When searching for new subcontractors to work with, it is always worth it to take the time to find partners that you can trust. Consider asking around for recommendations (HINT: we’ve heard your insurance agent is a great source), always check references, and take the time to verify proof of insurance. The extra time and effort spent verifying subcontractors is more than worth it.