WHY DO I HAVE TO PAY FOR MY INSURED SUBCONTRACTORS?
- oakes agency
- Jan 21, 2019
- 1 min read
Audits for contractors can be challenging. One of the most common questions auditors hear is, “Why do I have to pay for my subcontractors if they carry their own insurance?”
When a contractor hires subcontractors, an additional exposure is created on the jobsite that can result in claims against the contractor. These may include subcontractor negligence or inadequate limits of insurance, which would leave the contractor liable.
There are also possible defense costs when the contractor is named along with the subcontractor in a lawsuit. The potential for liability exposure is also real, if the subcontractor lets his policy coverage lapse.
For general liability policies, the exposure basis for a subcontractor is “total cost.” By definition, total cost includes all labor, materials and equipment furnished, used or delivered for use in the execution of the work.
Total cost also includes all fees, bonuses or commissions made, paid or due.
Properly insured subcontractors are assigned to the corresponding subcontractor work class code based on the type of work performed. If uninsured subcontractors are used, they will be classified to the payroll-based classification that best describes the type of work completed, as if they were employees of the contractor.
A best practice if you’re a contractor would be to require certificates of insurance from your subcontractors prior to paying them for the services performed. This allows you to retain some leverage in obtaining the certificate of insurance from your subcontractor.
Please contact the Oakes Agency if you have questions about your audit. Thank you for your business!
This is a really important topic that many contractors and business owners overlook until they receive an unexpected bill. Understanding why insured subcontractors can still affect your premiums and overall costs is essential for managing risk and avoiding surprises during audits.
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This is a helpful discussion about understanding insurance responsibilities when working with subcontractors. Many businesses face confusion around coverage requirements, costs, and how insurance policies apply to different workers involved in a project.
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Great explanation of the hidden costs involved with insured subcontractors. Many business owners overlook how coverage gaps can shift financial responsibility. This article makes the topic much easier to understand. For those interested in apps and entertainment tools, check out Wink Mod APK.
Totally agree. Without contractor insurance, self-employed workers can face big risks.
We've had clients ask for proof of building contractors insurance before signing contracts - it's becoming standard practice.