Are Subcontractors Covered Under Contractors Insurance?
The construction industry faces numerous risks as it undertakes building projects. From worker injuries to issues with materials, equipment, and permitting, insurance coverage is critical in protecting contractor assets. Contractor insurance goes a long way toward providing this coverage. When subcontractors are used to facilitate building projects, are they covered under contractor policies? In this guide, we will explore the essential details of CA contractor insurance, highlighting the benefits and limitations of this important coverage in terms of subcontractors.
The Role of Subcontractors
In the construction industry, many different groups come together to complete building projects. Typically, a project starts with a contractor, or the construction company that wins a contract to build a structure. Some contracting firms are capable of doing every aspect of the construction project, from design to infrastructure and finish work. Many others employ subcontractors, or companies that specialize in certain aspects of the construction process. Subcontractors formwork agreements with the primary contractor directly and not with the building or property owner. Subcontractors are often responsible for construction components like:
As the construction industry grows, the role of subcontractors in getting projects completed cannot be overstated. Contractors and subcontractors are integral parts of the building process.
Contractor Insurance: Does it Cover Subcontractors?
Contractor insurance can take many forms. In the state of California, CA contractor insurance may include policies like:
- Commercial General Liability
- Commercial Auto
- Contractors Indemnity
- Professional Liability
- Builders Risk
This insurance is typically required to do business within a state and is the foundational element of risk management in the building trades. This important insurance does not always cover subcontractors, however.
For contractors, subcontractors are only covered under a CGL policy if that policy has specific coverage endorsements. Without this endorsement, any injuries or property damage that occur from or during the subcontracting work may be the responsibility of the contractor, who has formed an agreement with the subcontractor. In other words, without the right coverage or endorsements, contractors may be on the hook for expensive liabilities.
It is critical that contractors examine their existing CA contractors insurance thoroughly. Many CGL policies specifically exclude coverage for subcontracting work. The contractors policy protects the contracting company, its employees, and its equipment. Anyone not on the contractor’s payroll is typically not covered without a subcontractor add-on or endorsement. Failure to adequately protect the contractor’s own interests may result in expensive legal exposures, not to mention the costs associated with a workplace injury or property loss.
Protecting Against Liability Risks
Contractors face difficult choices when it comes to using subcontractors for specialized building services. Since most CGL policies, including many CA contractor insurance policies, do not cover injuries or property damage/loss incurred by subcontractors, what can contractors do to protect themselves and their business assets?
There are two solutions used in the building trades. First, a contractor’s general liability policy may be added to with a subcontractor endorsement. This can raise premium costs, but it results in broader protection against risks. The second – and better – solution is to require the subcontractor to obtain their own insurance policy. Before signing a contract, a contractor must ensure that the policy is in force and that the contractor is named as an additional insured on the policy. Contractors must obtain proof of insurance from any subcontractors before conducting operations. CA contractor insurance provides robust coverage for a contractor’s own employees and assets. By taking the extra step of getting a subcontractor endorsement or requiring subs to carry their own liability insurance policies, the contractor gains more complete coverage against expected and unforeseen risks.
About Coastal Oak Insurance Services
At Coastal Oak Insurance Services, we strive to protect your personal and business assets from coast to coast. When you work with us, you’re family. Contact us today at (949) 519-3738 to learn more about how we can provide you with comprehensive and tailored insurance coverage.
Social Title: Contractor Insurance: Are Subcontractors Covered?
Social Description: In the construction industry, subcontractors may pose insurance challenges that necessitate a hard look at insurance coverages.