Construction projects are a virtual landmine of potential risks and liabilities. All parties involved in the construction process are trying to manage risk and ultimately transfer liability exposure to other companies.
and more often than not, they are trying to pass the exposure on to you, the subcontractor.
However, there are ways to protect yourself. By knowing and understanding your insurance program and purchasing coverage for your risks, you can increase your chances of survival
5 Subcontractor Insurance Coverages You Must Have
A quality general liability insurance policy is basic coverage for any subcontractor. It not only covers property damage you cause on the job, but also bodily injury (to a non-employee) you create.
A subcontractor general liability policy should also cover products and completed operations coverage. This expands your property damage or bodily injury insurance coverage to include claims that occur after you’re done with the job. An example of a completed operations claim would be if a rig you built a year ago collapsed and injured people.
As a subcontractor, you will most likely work with specialized tools or heavy equipment. These tools can vary in cost, but each is likely an expense you don’t want to incur if they’re stolen from a job site.
Also, you may have an office building where you keep spare parts or equipment that your customers have purchased or are waiting to be installed.
This type of property may be covered by a contractor’s property or equipment insurance policy.
Employee injuries occur frequently on construction sites. Although you may be able to pay for small injuries out of pocket, a serious injury could bankrupt the company. in most states, this coverage is also required by law.
Workers’ compensation covers medical payments associated with an accident an employee had while working for you.
Also, depending on your state, you may be liable for the injuries of your independent contractors. Having workers’ compensation and employers’ liability is critical to ensuring you are protected from the costs of these injuries.
If your business uses vehicles for its operations, it’s important that they are covered by a contractor’s commercial auto policy. This coverage will pay for liability and damage to your car caused by an accident or accident.
If you bid for public or significant construction projects, you must be covered by a surety bond or subcontractor default insurance program.
These policies cover your obligations to complete projects in the event that you become financially unable to do so or your business goes out of business. This gives the general contractor or project owner peace of mind that you have bona fide subcontractor insurance, but also assures them that they can hire another subcontractor to finish the work they already paid for.
3 Subcontractor Insurance Coverages to Consider
Since the court system often awards judgments in the millions, it is essential that you purchase a liability policy that can protect your business in the event of a lawsuit.
Most excess insurance policies can increase your employer’s liability limits, your general liability, and your business auto limits.
Being responsible for an accident that causes an environmental claim can have huge consequences. Often the EPA will also get involved and force you to pay fines, cleanup costs, and more. If paid out of pocket, pollution claims often result in bankruptcy.
A contractor’s pollution or environmental policy will cover the fines and damages you cause from a pollution event at a workplace (or even in transportation).
contractor errors & omissions (e&o)
Your general liability policy will not cover certain claims. There are some situations where you will need coverage that does not involve property damage or bodily injury. In these situations, a contractor’s E&O policy fills in many of the gaps. A strong e&o contractors policy covers allegations or claims involving:
failure to deliver promised services
negligence in rendering professional services
poor, incorrect or incomplete work
mistakes and oversights
Are subcontractors covered by the contractor’s insurance?
In general, each contractor should be responsible for carrying their own insurance. You may be given some protections in other contractor and subcontractor insurance policies, with caveats.
These protections can be additional insured endorsements, added by project and certificates, but make no mistake…if you are not paying directly for the insurance policy and your name is not listed on the declarations page, you cannot rely on an insurance policy that is not yours.
In addition, some insurance policies exclude liability for any operation that is not yours.
Subcontractor insurance can protect your business and investments in one of the highest risk industries out there. It’s important to know what your policy covers and to have an insurance professional who understands your business to help guide you through the process.