How to vet your subcontractors

subcontractor insurance

Most contractors depend on subcontractor for various aspects of their projects and they often assume the subcontractor is liable for his or her work. So how correct is this assumption?

Most clients who hire a contractor do not know if their contractor hires any subcontractors. They might assume that’s the case but they have no relationship or contact with these  subcontractors. the only person they know if their main contractor  they hired. Therefore, if there are any issues, the contractor would be  the first contact to find a fix for the problem or to file a complaint in case of any dispute.

As the primary contractor on a project, you don’t necessarily need to facilitate insurance to your clients for for all of your subcontractors but you do need to make sure everyone is covered.

Your general liability insurance is designed to protect you against claims for third-party property damage or injuries. So you must require subcontractors to carry their own liability insurance. It is crucial to make this a requirement as part of the contract and make sure you don’t simply take  their word for it. Make sure to request a certificate of insurance.

If, for some reason, you want to work with a subcontractor who doesn’t have their own general liability policy, you can add them to your general liability policy as additional insureds.

However, it is best to pre-qualify your subcontractors by asking for the following:

  • Insurance, License, and Bonds:  make sure your subcontractors carry their own general liability insurance and check to make sure they are licensed and bonded. Also, make sure to get a copy of proof of coverage.
  • Check the subcontractor’s credentials: This includes checking their licenses, bonds, and insurance but also checking their work history, lawsuits, claims, disputes or bankruptcies. You can check this by requesting a copy of  their loss runs, claims histories, and your subs’ experience modification rate. Anything higher than a 1.0 can indicate a history of workers’ comp injury claims.
  • Referrals: this is one of  the best ways to get personal feedback based on previous work from actual clients  and contractors. However, some subs are hesitant to facilitate referrals and  this usually  a warning sign.
  • Safety Protocols: your subcontractors should require their employees to adhere to OSHA safety regulations. Also, make sure to check if they have regular safety training plans. This insures that the job site would be safe.

One important aspect to working with subcontractors is to make sure you always have a written and signed contract even if you have  a good working relationship with the sub. every project must have its own contract.

Also, subcontractors use their own subs as well. It is important to make sure you vet their subs too. This would  be the same vetting process you used with your sub. Make sure they are licensed, insured, bonded and have a clean claim history.