Posted by Brian Robertson, CRIS | Account Executive, Construction Industry Services, Mason & Mason and AHT Insurance Agency, Inc.
General contractors bear a great deal of responsibility when hiring subcontractors for a job. Not only is the GC putting his or her reputation on the line by choosing a sub to perform a certain function, but they are exposing themselves to significant risk by entrusting others to bring a project to fruition. For these reasons, it is imperative that GCs mitigate their risk by requiring that each subcontractor signs a subcontractor agreement before they are hired that entails the following minimum provisions:
- The subcontractor must carry Commercial General Liability Insurance with at least $1,000,000 per occurrence and an aggregate of no less than $2,000,000.
- Each subcontractor must name you, the GC, as an Additional Insured on the General Liability policy on a primary and non-contributory basis for on-going and completed operations.
- All subcontractors must carry Workers’ Compensation insurance. It is important to note that the workers’ compensation law requires you as the GC to insure workers of uninsured subs and may even make you responsible under many circumstances to insure injuries to a sole proprietor. Without a Certificate of Workers’ Compensation from each subcontractor, an insurance auditor will likely make a charge for each sub who is lacking the insurance or proof of the insurance when the payroll audit is made.
- A Certificate of Insurance (COI) must be provided before a sub starts any work. This must be an original COI with an original agent signature (no copies). Without an original COI, the subcontractor will not be paid.
- The subcontractor agreement should include a hold harmless or indemnity clause. This states that the GC is not responsible for any claims, damages, losses, and expenses (including legal fees) arising out of the subcontractor’s work, as well as the work of the subcontractor’s subcontractors.
For more than three decades we’ve developed the industry know-how and trade organization relationships that are critical to proper insurance policy design. We understand the subtle nuances of construction insurance and how each detail affects the way you, as a contractor, do business. We’re happy to put that knowledge to work. Whether you are a general contractor and need guidance on how much insurance to require or you are a subcontractor who needs assistance making sure you are meeting the obligations of your contract, Mason & Mason is here for you.
The information provided above is for informational purposes only. As an insurance agency and not a member of the Massachusetts or New Hampshire bar associations, we strongly suggest you consult an attorney before making any decisions on the wording and/or use of legal contract documents.