Construction projects in New York rely heavily on subcontractors to perform specialized work such as electrical, plumbing, framing, and concrete installation. While subcontractors are essential to completing projects efficiently, they also introduce additional liability exposure for general contractors (GCs). When a subcontractor commits a negligent act that results in bodily injury or property damage, an important question arises: Will the general contractor’s Commercial General Liability (CGL) policy provide coverage?
The answer depends largely on how the contractor’s policy addresses subcontractor risk and whether the GC has complied with specific contractual and documentation requirements — particularly those contained in hard hammer and soft hammer clauses.
Commercial General Liability and Subcontractor Negligence
A standard CGL policy is designed to protect a business from third-party claims for bodily injury and property damage arising out of its operations. In the construction context, this can include liability arising from the acts or omissions of subcontractors when the GC is alleged to be legally responsible.
However, insurers have recognized that subcontractor-related claims represent a significant portion of construction losses. As a result, many New York contractor liability policies now contain endorsements that strictly govern when and how coverage applies to losses caused by subcontractors. These endorsements are commonly known as hard hammer or soft hammer clauses.
Both clauses require a foundational element:
There must be a written and fully executed subcontract agreement in place before work begins that includes insurance requirements and a hold harmless (indemnification) provision in favor of the general contractor.
Without this contract in place prior to the loss, the GC’s ability to transfer risk — and even to trigger its own coverage — may be compromised.
Hard Hammer vs. Soft Hammer Clauses — What’s the Difference?
Hard Hammer (Subcontractor) Clause
A hard hammer clause is a strict contractual and insurance condition that requires the general contractor to fully comply with subcontractor risk transfer requirements before the subcontractor begins work on the project. This compliance typically includes:
- A written and executed subcontract agreement containing:
- Insurance requirements, and
- A hold harmless / indemnification clause in favor of the general contractor;
- A Certificate of Insurance (COI) issued by the subcontractor’s insurer;
- An Additional Insured (AI) endorsement naming the general contractor as an additional insured on the subcontractor’s CGL policy;
- A Waiver of Subrogation in favor of the general contractor;
- Minimum insurance limits and coverage terms meeting or exceeding those required by the prime contract.
Under a hard hammer clause, these items are considered conditions precedent to coverage. This means that if the GC fails to secure both the written contract with hold harmless language and the required insurance documentation before work begins, the insurer may deny coverage entirely for any claim arising out of that subcontractor’s work.
Even if the GC was not directly negligent and even if the subcontractor’s actions alone caused the loss, failure to comply with a hard hammer clause can leave the GC without coverage for defense costs, settlements, or judgments related to that subcontractor’s negligence.
In practical terms, a hard hammer clause enforces strict discipline in subcontractor risk management and documentation.
Soft Hammer Clause
A soft hammer clause requires the same contractual and insurance elements as a hard hammer clause:
- A written and executed subcontract with insurance and hold harmless provisions;
- A Certificate of Insurance;
- Additional Insured endorsement;
- Waiver of Subrogation;
- Required limits and policy terms.
The key difference is in the consequence of non-compliance.
Rather than denying coverage outright, a soft hammer clause typically imposes a financial penalty if the GC fails to obtain the required paperwork. Under a soft hammer clause:
- Coverage may still apply under the GC’s CGL policy;
- However, the insurer will assess a deductible or self-insured retention for losses attributable to the subcontractor’s negligence;
- The deductible may be significant and applies specifically because the GC failed to meet documentation and contractual requirements;
- The provision serves as a financial incentive for compliance rather than an absolute bar to coverage.
Soft hammer clauses still require proper documentation and executed agreements, but the consequences of non-compliance are monetary rather than categorical.
What Happens When a Subcontractor Causes a Claim Without Proper Paperwork?
When a subcontractor causes a loss and the GC has not complied with its policy’s hard or soft hammer requirements, several outcomes may occur:
- The insurer may deny coverage entirely (under a hard hammer clause);
- The insurer may apply a substantial deductible (under a soft hammer clause);
- The GC may lose contractual indemnification rights against the subcontractor;
- The GC may be forced to fund defense and settlement costs out of pocket;
- Additional insured coverage may be deemed invalid if there was no written agreement in place before work began.
In New York, courts and insurers give great weight to whether a written and executed subcontract agreement existed prior to the accident. A Certificate of Insurance alone is not sufficient to establish coverage or contractual protection.
Five Examples of Covered and Uncovered Claims
1. Falling Tool Injures a Pedestrian (Covered)
A subcontractor drops a tool from scaffolding, injuring a pedestrian.
- With proper written contract and AI endorsement: GC’s CGL provides coverage.
- Without proper documentation: hard hammer denies coverage; soft hammer applies deductible.
2. Fire Caused by Welding Work (Covered)
A subcontractor’s torch ignites a fire that damages adjacent property.
- With compliance: covered under the GC’s policy and subcontractor’s policy.
- Without compliance: coverage denied or subject to deductible.
3. Defective Workmanship Only (Uncovered)
A subcontractor installs drywall improperly, requiring removal and replacement.
- No resulting property damage or injury.
- CGL policies generally exclude pure defective workmanship — uncovered regardless of hammer clause.
4. Injury to Another Worker (Covered)
A subcontractor’s employee injures another contractor’s worker due to negligence.
- With contract and insurance compliance: GC’s CGL may respond.
- Without compliance: coverage denied or deductible applies.
5. Delay and Economic Loss (Uncovered)
A subcontractor causes delays leading to lost rent or productivity claims.
- Pure economic losses without bodily injury or property damage are typically excluded from CGL coverage.
BGES Group: Specialists in Insuring New York Contractors
New York construction projects present some of the most complex insurance and liability challenges in the country. From strict contractual indemnification rules to demanding owner insurance requirements, contractors need knowledgeable guidance and properly structured insurance programs.
BGES Group specializes in insuring New York contractors and helping them navigate the complexities of subcontractor risk transfer, additional insured requirements, and hard and soft hammer clauses. We work closely with our clients to:
- Design compliant insurance programs;
- Review subcontractor insurance requirements;
- Ensure proper contract language and documentation;
- Prevent coverage gaps before claims arise;
- Protect contractors from devastating uninsured losses.
Our mission is not only to place insurance, but to help contractors understand how their policies actually work when something goes wrong.
Contact BGES Group
BGES Group
Gary Wallach
📞 914-806-5853
✉️ bgesgroup@gmail.com
🌐 www.bgesgroup.com
Construction risk is unavoidable. Being uninsured for it is not. With the right contracts, the right coverage, and the right advisor, New York contractors can build with confidence.
