In the construction industry, a major component of your risk exposure is your subcontractors. Subcontractors are considered independent entities and are expected to carry their own insurance coverage. The quality of their coverage is important because it can determine whether or not your own insurance policy will come into play in the event of a loss. Here at Executive Choice Insurance, we have developed a checklist to help you keep track of your subcontractors’ insurance coverage and take additional steps to protect yourself from potential liability. This is by no means an exhaustive list of steps to take when hiring subcontractors, and you should always consult with legal counsel regarding your business practices to be sure you are properly protected.
☐ First, request a copy of the subcontractor’s Certificate of Insurance showing active General Liability, Workers’ Compensation & Commercial Auto Insurance policies
☐ The General Liability insurance should have a limit of $1,000,000 Per Occurrence, and a $2,000,000 Aggregate Limit. The description of operations should state that your business is listed as an Additional Insured with respect to On-going and Completed Operations (ISO Forms CG 20 10 and CG 20 37). The description should also state that the coverage is Primary and Non-Contributory, and that a Waiver of Subrogation applies (ISO Forms CG 24 04 and CG 20 01).
☐ If the subcontractor does not have employees, you may consider accepting a signed waiver of Workers’ Compensation coverage in lieu of a Workers’ Compensation policy if it is allowable to do so in your state. However, if they have any employees performing work on their behalf, it is recommended they carry a Workers’ Compensation policy with limits of no less than $1,000,000. The Workers’ Compensation policy should also include a Waiver of Subrogation (ISO Form WC 00 03).
☐ The Commercial Auto policy should include Hired & Non-Owned Auto coverage and have a Combined Single Limit of $1,000,000. It is also recommended to be listed as an Additional Insured and have a Waiver of Subrogation on the Commercial Auto as well (ISO Forms CA 04 44 and CA 04 03)
☐ Once you receive the Certificate of Insurance, you should contact the insurance agent listed to verify that all of the policies are active, and that the coverage displayed on the certificate is accurate. It is also recommended to request copies of each endorsement to be sure it is an ISO Form or offers equivalent coverage. Feel free to send over any endorsements you receive if you would like us to review the coverage provided.
☐ In addition to requesting a copy of the Certificate of Insurance, each subcontractor should also sign a Hold Harmless Agreement in your favor.