Working with numerous Artisan Contractors I have learned it is often necessary for them to subcontract out parts of a project. There are several key points to address when you hire a subcontractor to protect your business from losses and unforeseen expenses. Several of the key points as to why a Certificate of Insurance (COI) is needed and what you should request are listed below.
Always require the subcontractor to provide you a Certificate of Liability Insurance (COI) naming you as an additional insured.
This must be done BEFORE THE SUBCONTRACTOR STARTS WORKING FOR YOU!
The COI should indicate the limits of liability for General Liability, Auto Liability, and Worker’s Compensation (most states)/Employers’ Liability.
The COI should have the box marked that shows the certificate holder is named as an additional insured.
The limits of liability required by the subcontractor should be in writing and at a minimum should be equal to your limits of liability. By requiring the COI, the subcontractor’s insurance policy will insulate you from financial responsibility. If there is an accident that is caused by the negligence of the subcontractor and you are named in a lawsuit or claim, you can find protection in the subcontractor’s policy.
If a subcontractor does not have Worker’s Compensation Insurance and they are injured on the job, the exposure can be added to your policy and your experience — thus pushing up your rates.
If a subcontractor is underinsured or uninsured, their payroll will be added to your General Liability and Worker’s Compensation policies at audit. This will create an additional premium that you are responsible to pay. These expenses were not budgeted and will cut into your profit margin. I have seen many excellent craftsmen not succeed in running their business because they looked at the purchase of their insurance as a necessary evil. If these people take advantage of an Independent Insurance agent to be their trusted advisor, they would have a better understanding of the complexities of the insurance process. So, before you renew your policy, contact your Trusted Choice agent at Richey-Barrett Insurance.