You hire subcontractors as part of your regular construction operations. You expect your subcontractors to be qualified to perform the work and to be properly insured to protect themselves and you if there is a problem arising from the job.
When qualifying subs based on their ability to protect themselves and you, we suggest you have a written subcontractor agreement with every sub on the job. It should include the following provisions at a minimum:
- Subcontractors must carry Commercial General Liability insurance with at least $1,000,000 per occurrence with an aggregate of no less than $2,000,000.
- The subcontractor’s policy must name you as an Additional Insured on the General Liability policy on a primary and non-contributory basis.
- All subcontractors must carry a Workers’ Compensation policy. You should make no exceptions to this rule.
- Subs must provide proof of this insurance by providing a Certificate of Insurance prior to the start of any work. No payments can be made to a sub prior to the receipt of the Certificate; this must be in the contract.
- The Certificate must be an original Certificate with an original agent signature. Do not accept photocopies or fax copies.
- The contractor should contain an indemnity/hold harmless clause. A sample of such a clause is as follows: “To the fullest extent permitted by law, Subcontractor shall indemnify and hold harmless the builder and owner against any claims, damages, losses, and expenses, including legal fees, arising out of or resulting from performance of subcontracted work to the extent caused in whole or in part by the subcontractor or anyone directly or indirectly employed by the subcontractor.”
It is important to note that the Workers’ Comp law makes you responsible to insure workers of uninsured subs and may even make you responsible under many circumstances to insure injuries to a sole proprietor. If you do not receive Certificates of Workers’ Comp from each and every subcontractor, the insurance auditor will probably make a charge for this sub when he completes a payroll audit. If you are told no charges will be made for uninsured subs, you should demand a statement in writing from the insurance company, not agent, that uninsured subcontractors will not be picked up at audit.
Mason & Mason is an insurance agency. We are not members of the Massachusetts Bar Association, the information above is for informational purpose only. We strongly suggest you consult an attorney before making any decisions on the wording and/or use of legal contract documents.