Is A Subcontractor’s General Liability The Only Coverage You Need?

If my subcontractors have General Liability, do I, as the General Contractor, need to carry General Liabilty as well?

As a general contractor, you are committing to organize and oversee a project from conception to completion. Every stage of the process is done under your guiding hand and instruction but executed by those who are subcontracted to perform the manual labor. You are the responsible and liable party at the end of the day. Any action or inaction that results in loss of any kind is inevitably your responsibility, making proper coverage all the more important. Understanding the types and level of coverage is the first step in protecting yourself and your business assets.

Are sub- contractor’s policies guaranteed for the entire year? 

The long and short answer is no. Every policy is valid only if kept current and effective. Although the certificate may be valid at the start of the project, there are quite a few scenarios that can complicate the situation and leave your business at risk. One scenario is your sub contactor, who by all measures seems quite responsible, but for one reason or another, he has failed to pay his policy fees resulting in a lapse of coverage. Another situation that could arise is soon after employment, the sub decides he doesn’t need the policy and cancels it. Unless you have been added by endorsement as a designated entity or additional insured, you would remain blissfully unaware that your company is now vulnerable and exposed. Without adequate coverage, you would be responsible should any accident occur. With a general liability policy of your own in place, your company would stand protected.

What happens if the subcontractor is underinsured? 

Although the promise of a sub contractor’s general liability coverage can seem encouraging and potentially enough in the event of an accident, the truth is, without meticulously inspecting every single policy of every single sub-contractor, it is impossible to guarantee the proper protection is in place, which leaves you and your business without the coverage you deserve. Moreover, having a sub that is insured does not hold you exempt from liability. If the policy in place has limits that are too low to cover all costs associated with the loss. The burden of payment is now on you.  For example, your contractor is checking on a few finishing touches after the project has been completed. When leaving, he puts his truck in reverse instead of drive, crashing into the house creating substantial damage that results in $500,000 in repairs. Unfortunately, his policy only covers $100,000, which leaves you, the general contractor, on the hook for the remaining balance. If you are properly insured as well, your policy would kick in and cover the remaining cost, keeping you and your company out of litigation and maintaining your intact reputation.

Can my General Liability cover defense and legal costs?

Let’s be honest, regardless how experienced or skilled a crew may be, there can always be room for error or accident. In the event that happens, as a contractor you are ultimately going to be roped in to any lawsuits or legal issues that may emerge  from concerns surrounding each project. With General Liability coverage, the expense of legal representation and the costs that arise from launching a sound defense, are covered. This coverage alone can save you and your company thousands of dollars.

If you or your company has any questions regarding general liability, please reach out to Mainline for more information.