Is your Insurance Policy covering the subcontractors you use in your business? The answer is no!
Insurers do not include subcontractors under liability insurance policies. If they did this, the insurer then accepts the liability for all of the work that the subcontractor undertakes. For example, you may have a subcontractor who does semi regular work for you throughout a year, but they also work for other companies and trades as well.
By including this subcontractor under your policy you are in fact covering them for all the work that they will perform throughout an insurance period, regardless of whether it is for you or not. This would include jobs that they undertake for other companies and which you know nothing of. The subcontractor could potentially cause an incident which results in property damage or an injury to a member of the public, and the subsequent insurance claim would be held against you, because they are an insured party under your policy. It will then be for the insurer to decide whether the policy will respond to this incident, or deny liability. It may leave you responsible to pay the costs for damages for work of which you knew nothing about – costs which could be in the tens of thousands of dollars or higher, depending on the incident.
Subcontractors should be treated like their own company and therefore should have their own cover in place for the work that they are performing. Just as you are required to have your own insurances in place, so are subcontractors required to have the same level of cover.
The best way to ensure a subcontractor you use has their own cover in place is to obtain a Certificate of Currency from them.
A Certificate of Currency will provide you with the information that is on their policy, and can give you re-assurance that they have cover and that you may not have significant out of pocket expenses. It is important to check the Certificate of
Currency received to ensure all details are correct.
Key points to look for include;
- company name of the subcontractor
- Are the dates current
- Is the limit of liability adequate for the job you are performing
- Are there any exclusions or limitations on their policy
Your liability policy should also include an extension for Vicarious Liability. Vicarious Liabilities can arise in situations where you are responsible for a third party (eg. the subcontractor or contractor who is working for you), and they are negligent in carrying out that responsibility and exercising control. If they are negligent you may be deemed to be responsible for some of the property damage or bodily injury caused by the subcontractor or contractor. Vicarious Liability covers this exposure for you, so it is important to check that your policy includes this extension so that you are not left out of pocket or with a damaged reputation.
Some Key Points To Remember When Dealing With Subcontractors:
- Ensure all contractors are aware of their responsibilities and understand house rules
- Ensure records are kept up to date detailing contractors attendance at principal’s induction program
- Confirm that all subcontractors or contractors have their own adequate insurance cover in place that provides indemnity for you by naming you as their contract principal
- Check that the cover a subcontractor has in place includes sums insured that match your insurance cover and has no clauses that will pass the liability on to you, or exclusions that relate to the work you are performing; and
- Obtain and keep on file a copy of each subcontractor’s Certificate of Currency and diarise to ensure that an updated certificate is obtained each year or for when new work is performed.