But what happens if one of those subcontractors does not have insurance and makes a mistake or causes an accident that leads to a claim?

Hiring an uninsured subcontractor may have your insurance policy picking up the liability caused by the uninsured contractor! When you hire a subcontractor that does not carry insurance the risk transfers to the General Contractor (GC), this could include property damage, a workplace injury or bodily injury caused by the subcontractor’s actions.

What are some of the common claims that are caused by subcontractors?

Utility line strikes -According to Common Ground Alliance, there are between 400,000 and 500,000 utility strikes in the United States each year. (To learn more read our past blog Call Before You Dig).

Accidental property damage ranging from burst pipes, to collapsed walls to broken windows.

If an underwriter thinks a general contractor is not vetting their subcontractors, they may non-renew the policy. The underwriter may feel as if they are taking on too much risk. In addition, during the yearend audit uninsured subcontractors can (should) be rated at the insurance company’s rates for that class of business as if they were an employee. This can create a large financial loss for the general contractor.

To ensure your subcontractors are properly insured follow these best practices;

Confirm the policy period covers the entire duration of the project.

Do liability limits meet the contractual requirements.

Is your name correctly listed.

Does the certificate include the required endorsements; completed operations? Waiver of subrogation? Requirements to be notified of cancelation?

Hiring uninsured subcontractors may seem like it is going to save you money but in the long run it could cost you more than you ever imagined. Just like purchasing your insurance online without the help of a Trusted Choice Agent at Richey-Barrett. So, before you renew your policy call Richey-Barrett Insurance to assist you in meeting your risk management and insurance goals.