General liability insurance will protect you and your contractors if you were to be sued. However, when it comes to subcontractors working on your behalf, the line grows a little less clear, and their work could be excluded from your general liability coverage. Subcontractors are not legally required to have liability insurance, unless the client contract states it to be mandatory. It is critical for your business to check subcontractors’ status and have the insurance details worked out before any new projects begin. Make adjustments to your contract to protect you in the event of a lawsuit.
The Importance of Liability Insurance
You may not normally expect a lawsuit were to take place, but it is better to be prepared. If a project were to go wrong, such as an injured customer or a minor legal violation, it may lead to an expensive lawsuit.
Liability insurance allows for an attorney to take care of the settlement and defend you at trial. Liability insurance covers most or sometimes all of the expenses if you were to lose the case. It is dependent on the limits of your specific policy, so speak with your insurance agent to be sure you are fully educated on your plan.
What’s important to note in this case is that primary contractors can be sued for subcontractor’s errors. The burden is put onto the primary contractor if the subcontractor does not have insurance.
What your Insurance Covers
Contrary to popular belief, subcontractors are very rarely covered through the primary contractor’s liability insurance policy.
Most insurance plans do not cover damages that are not caused by you personally. You might want to extend your policy for a specific project, which you can do so on a temporary basis. Ask your insurance agent about your options for covering subcontractors.
Establishing Liability Insurance
Protect yourself against subcontractor errors by requiring on contract that subcontractors hold their own liability insurance. Request proof of their policy before any work begins. If a client wants all contractors to maintain liability insurance and you do not insist subcontractors have liability insurance, you are risking the breach of contract.
Liability Insurance Alternatives
If subcontractors do not have insurance and you feel the need to start a project anyway, mandate your subcontractor to reimburse you in the case of a lawsuit. You will not be protected from being sued, however your subcontractor will need to cover any expense you acquire.
You may choose bonding as another option, which allows paying a surety bond to a bonding company or organization. The bond is used to cover damages but you will be fixed to the limits of the bond, which are not always sufficient in covering legal fees or losses.
About Sine Insurance
At Sine Insurance Group, we are dedicated to providing you with custom tailored insurance policies to protect your assets. Our comprehensive packages have been expertly crafted to serve St. Louis and the surrounding areas for the past 25 years. For more information about our products, contact us today at (636) 947-1177.