Do Subcontractors With Insurance Indemnify The Main Builder If Both Are Sued?

Caeva O'Callaghan | December 21st, 2021


When you are a subcontractor, things can get messy when the project goes wrong – but who’s responsible if someone gets sued?

If you are a subcontractor, it is likely you will be asked by the main contractor to provide a copy of your insurance policy and that the main contractor will be indemnified on your policy.

This is to protect the main contractor’s insurance policy against a claim arising out of a subcontractor’s negligence.

In this article, we’ll go over the following questions:

  • Am I liable for the work of my subcontractors?
  • Do subcontractors need to have their own insurance?
  • What is employers’ liability insurance?

It’s important when performing dangerous building work on-site that everyone is covered by the proper level of insurance. If not, and things go wrong, very messy legal proceedings may result.

Am I liable for the work of my subcontractors?

Not necessarily. You don’t need to purchase insurance cover for everyone of your subcontractors, as long as you make sure they each have valid insurance of their own.

There are generally two options when it comes to the insurance cover between contractors and subcontractors: the first is that you require each of your subcontractors to buy their own insurance cover to protect their liabilities, equipment and materials. Second, you can add each subcontractor to your current general insurance policy.

It’s generally more cost-effective for contractors to go with the first option. By ensuring that your subcontractors are fully qualified and insured as part of the terms of agreement, you don’t have to pay anything extra and there’s a greater chance that the subcontractors you’re taking on are reliable and trustworthy.

However, if the subcontractors generally work only for you, and you see them more as employees than anything else, it may be worth covering them under your own policy for peace of mind.

Do subcontractors need to have their own insurance?

Not if the main builder they are working for agrees to put them on their existing policy and does so before work commences – however, it’s always best to take out your own insurance.

You may be able to negotiate a better rate from the main contractor if you have your own insurance. Any contractor worth their salt should ask you if you have your own insurance to protect their interests.

As a subcontractor, you’ll need an insurance policy that covers you for public liability, products and materials, and accidental damage if you want it.

When you take on a job, generally speaking, the main contractor will require the subcontractor to have public liability insurance and will specify the indemnity limit that policy needs to have. The indemnity limit is the maximum that the insurance will pay in the event of a claim.

Even if your main contractors’ insurance covers public liability, it’s best to have your own. This is because a claim could be made against you, the subcontractor, at any time. Often this happens because someone who has suffered a loss will see a company name on a van and make their compensation claim against that company, assuming they are responsible.

While it may be possible to pass the compensation claim to the main contractor’s insurance to deal with, it’s not always a straightforward process. Having your own public liability cover – at the very least – will make it all a lot easier.

What is employers’ liability insurance?

Employers’ liability insurance protects those who are working for you. If you have been hired to do a building project on a client’s house, and are looking for subcontractors to do some of the work, you are considered the main contractor. And as a builder or a tradesman employing subcontractors, you should make sure that all of you have the right builders’ insurance.

If your subcontractors don’t have their own insurance, it’s simple enough to get them added to your policy – but first of all, you need to put a name to your working relationship.

From an insurance point of view, you may have three types of people working for you:

  • Employees who work with you permanently or part-time
  • ‘Labour-only’ subcontractors, who work under your supervision using your tools and materials
  • ‘Bona fide’ subcontractors, who typically make their own decisions and use their own tools and materials

Why does this matter? Well, if you have any employees or labour-only subcontractors, you’re legally required to have employers’ liability insurance. This protects anyone who works for you against accidents, theft, and other workplace risks.

You’ll need to give your insurer a lot of information to make sure they understand how the subcontractors fit into your project. Your insurer may not agree with your definition of labour-only or bona fide, but if you give us a call this is something we can help clarify.

We have many experts on hand to help you out when it comes to navigating builders’ insurance, so feel free to give us a call and we can help you find the right insurance for your business.

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YOUR LOCAL BUILDING INSURANCE SPECIALISTS

DEBBIE BRADY

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RACHEL DIXON

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MARION McBRIEN

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All Information in this post is accurate as of the date of publishing.