When a general contractor employs a subcontractor, ensuring proper insurance coverage is essential to manage potential risks and liabilities. While specific requirements can vary based on factors like the nature of work and local regulations, here are the fundamental insurance types that are often recommended as a minimum for subcontractors:
1. General Liability Insurance: This coverage safeguards against third-party claims for property damage or bodily injury arising from the subcontractor's work. It's a fundamental protection that helps cover legal expenses and potential damages.
2. Workers' Compensation Insurance: If the subcontractor has employees, this insurance is crucial. It provides coverage for medical expenses and lost wages in case of work-related injuries or illnesses.
3. Professional Liability Insurance (Errors and Omissions Insurance): If the subcontractor provides specialized services or advice, this insurance addresses claims of negligence, errors, or omissions in their work.
4. Commercial Auto Insurance: If the subcontractor uses vehicles for business purposes, commercial auto insurance covers accidents, property damage, and injuries involving these vehicles.
5. Umbrella Insurance: This policy acts as an additional layer of protection, extending coverage beyond the limits of other policies. It's valuable when dealing with potentially high-risk projects.
6. Property Insurance: If the subcontractor's work involves valuable tools, equipment, or property, this insurance covers potential loss, damage, or theft.
7. Cyber Liability Insurance: If the subcontractor handles sensitive data or operates online, this insurance addresses data breaches and cyber incidents.
8. Surety Bond: Depending on the project, a surety bond might be necessary. It ensures that the subcontractor fulfills their contractual obligations; if not, the bond covers financial compensation.
9. Inland Marine Insurance: This type of insurance covers equipment and tools while they are in transit or temporarily stored off-site.
10. Employer Practices Liability Insurance (EPLI): If the subcontractor has employees, this insurance protects against claims related to wrongful termination, discrimination, or harassment.
11. Environmental Liability Insurance: For projects that could impact the environment, this coverage addresses potential pollution or contamination risks.
While the above is self-explanatory, it is now your job to have a written and signed Subcontractor Agreement with all such parties. Your Agreement must protect you from the subcontractors substandard work and/or liabilities for which you want to be held harmless. You must engage legal counsel to provide you with a Subcontractor Agreement containing clauses that hold you harmless, contain indemnification agreements that are enforceable in the state in which that party performs services for you. Further, there needs to be a section regarding insurance and subcontractors obligation to name you as an Additional Insured, Waiver of Subrogation in your favor, subcontractors insurance coverage should be primary and noncontributory, and with a 30 day notice of cancellation clause. Your legal counsel can guide you accordingly to develop this document for which you must use in all of your subcontractor relationships. Bone, Robertson, and McBride does not practice law and as such you must rely upon the properly licensed professionals to properly construct these documents.