Before hiring any subcontractor, you as the general contractor (GC) should make sure you have two important documents in hand. The first is a signed contract between you and your subcontractor which will spell out the particulars of your working relationship. The second is a valid certificate of insurance (COI) that provides evidence that the subcontractor is properly insured. While the contract has likely been drafted by your attorney and contains standard language that remains constant from one contract to the next, you should review each COI carefully to make sure the sub is in compliance with the terms of the contract as they relate to insurance. In fact, you should pay particularly close attention to the following five key elements:
1. The subcontractor must carry general liability insurance, and the coverage amount needs to meet at least the minimum required in the contract (typically at least $1,000,000 per occurrence).
2. The subcontractor needs to carry worker’s compensation insurance, even if that subcontractor is a sole proprietor or LLC member.
3. You are named as an additional insured under the policy for both ongoing and completed operations on a primary and noncontributory basis. This information is typically found in an open description section in the bottom third of the COI where comments can be entered. In both cases the endorsement adding the coverage should be referenced and attached.
4. The COI should state that the subcontractor will waive subrogation against you. This prevents the subcontractor’s insurer from going after your insurance company once the claim is settled to recover some or all of the money paid to the claimant.
5. The subcontractor must carry commercial automobile insurance with limits of at least $1,000,000.
Important to note: You should only accept a COI that is emailed or mailed directly from the subcontractor’s agent. It should not be accepted if it is delivered by the subcontractor.
Also important to note: Not all insurance brokers are familiar with the subtle nuances of construction insurance and how to create a proper insurance program for the construction trade. As a leading construction insurance brokerage firm with decades of experience, Mason & Mason routinely reviews COIs to ensure they are in compliance with our GCs respective contracts. In turn, our knowledgeable professionals can assist subcontractors with their insurance needs to make sure they have the right policies in place with the right amount of coverage at a fair price. If you have questions about your COI ask your account manager about the Mason & Mason Contractor Assurance Program for subcontractors.