Are You Liable for Subcontractor Work?

January 2019
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Is a general contractor liable for the work of subcontractors?

Your client hired you to do a job. Which means your client is going to come after you if the job isn’t done right or results in damage or injury. When it comes down to it - it’s your name on the client contact.

You don’t necessarily need to provide insurance for all of your subcontractors - but you do need to make sure everyone is covered.

When Subcontractors Fail

You’re doing work on a multi-family project. You subcontract the plumbing out, but your plumber didn’t correctly seal a pipe on the top floor. A water leak causes $1M in damage to completed units, damaging walls and the personal property of the residents who have already moved-in.

You’ve completed a remodel project. Your flooring subcontractor installed a faulty heating element for the heated floors in the master bathroom. The homeowner was injured as a result.

Insuring Subcontractors

Your general liability insurance is designed to protect you against claims for third-party property damage or injuries.

Require subcontractors to carry their own liability insurance.

Don’t be shy about making this a requirement. Spell it out in the construction contract. It’s a very common practice, so any subcontractor with experience should have their own insurance in place.

But don’t take their word for it.

Verify by requesting a certificate of insurance.

If, for some reason, you want to work with a subcontractor who doesn’t have their own general liability policy, don’t leave them uncovered.

Add them to your general liability policy as additional insureds.

Best Practices for Hiring Subcontractors

The best way to avoid subcontractor liability claims? Hire the best.

Pre-qualifying subcontractors is a great way to get the best team for the job and reduce risk once work is underway. Here’s what to look for:

Insurance, License, and Bonds

Require your subcontractors to carry their own general liability insurance and check to ensure that they’re properly licensed and bonded, as well. Ask your subs to provide proof of insurance during the pre-qualification process.

Check Credentials

Go beyond checking for licenses, bonds, and insurance. Take the time to examine subcontractor work history, lawsuits, claims, disputes or bankruptcies, as well. Inquire about loss runs, claims histories, and your subs’ experience modification rate. Anything higher than a 1.0 can indicate a history of workers’ comp injury claims.

Ask for Referrals

Subcontractors with a good work history will be happy to provide references. If your subcontractor is reluctant to hand over referrals, there could be a good reason for it. Talking to general contractors they’ve worked with in the past will give you a good idea of their work ethic and quality.

Look at Safety Protocols

Does your subcontractor require their employees to adhere to OSHA safety regulations? Do they have safety training, plans, and procedures that will keep your job site running smoothly and safely? Not only do you want to avoid injuries and fatalities during construction, but you also want to be sure you’re not shut down by local inspectors for safety violations.

Always Use a Contract

Even if you’ve worked with a sub on countless prior jobs, it’s always a good idea to have a sound written construction contract that spells out everyone’s expectations, roles, and responsibilities.

Vet Your Subcontractors’ Subs

If your subcontractor will be subbing any portion of their work out to another party, be sure you know about it. Ask for the certificate of insurance, license, and bonds for anyone who will be doing work on your project.

Ultimately, it’s your project and you’ve signed the contract with the client. Your client is going to look to you - and your insurance policy - if anything goes awry. But that doesn’t necessarily mean you’re going to be left holding the bag for a subcontractor liability issue. Require liability and workers’ comp insurance, a valid license, and contractor bonds from any subcontractors you work with, just in case.

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