When it comes to New York contractors and their commercial general liability (CGL) policies, few issues are as critical—or as misunderstood—as the treatment of subcontractors’ insurance. Most general contractors hire subcontractors to handle specialized portions of work, but when those subcontractors fail to carry proper insurance, it can directly impact the GC’s liability coverage and premiums.
That’s where hard hammer and soft hammer clauses come into play. These provisions determine what happens if a subcontractor does not carry the required insurance coverages. For New York contractors, where insurance requirements are among the strictest in the nation, understanding these clauses can mean the difference between staying in business and financial disaster.
This article will explain:
1. The difference between hard hammer and soft hammer clauses (and what insurance subcontractors must carry).
2. Whether coverage applies if subcontractors carry inadequate insurance.
3. How insurance companies charge depending on subcontractors’ coverage status.
Finally, we’ll explain how BGES Group helps contractors navigate these challenges and reduce their risk.
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1. Difference Between a Hard Hammer and Soft Hammer Clause
When a general contractor hires subcontractors, insurers typically require that each subcontractor carry its own set of coverages. A standard CGL policy in New York will require subcontractors to carry:
• General Liability Limits: Usually at least $2,000,000 or more.
• Additional Insured Endorsement: The GC must be listed as an additional insured.
• Primary and Non-Contributory Coverage: The subcontractor’s policy pays first without contributing from the GC’s policy.
• Waiver of Subrogation: Prevents the subcontractor’s carrier from suing the GC’s carrier to recoup payments.
• Workers’ Compensation Coverage: Required for all subcontractors with employees.
If subcontractors meet these requirements, the GC is protected. But if they do not, the hammer clause in the GC’s policy kicks in.
Hard Hammer Clause
A hard hammer clause is the strictest form. If a subcontractor fails to carry the required coverages, and a claim arises out of that subcontractor’s work, the GC’s insurer can deny coverage entirely. This leaves the general contractor personally responsible for defense costs, settlements, and judgments.
For example: If a subcontractor’s worker falls from scaffolding, and the subcontractor had no workers’ compensation and failed to name the GC as an additional insured, the GC’s policy with a hard hammer clause may outright deny coverage.
Soft Hammer Clause
A soft hammer clause is less severe. In this case, if a subcontractor lacks the required coverages, the GC’s insurer may still provide coverage—but only subject to a significant deductible or self-insured retention (SIR). These can range from tens of thousands to even hundreds of thousands of dollars, depending on the carrier and policy.
So instead of being left without coverage, the GC is still protected—but at a steep cost.
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2. In the Event of a Claim, Would There Be Coverage if a Subcontractor Carries Inadequate Insurance?
The answer depends entirely on whether the GC’s policy contains a hard hammer or soft hammer clause.
• With a Hard Hammer Clause: There would be no coverage at all if the subcontractor’s inadequate insurance contributed to the loss. The claim would be denied, leaving the GC fully exposed.
• With a Soft Hammer Clause: Coverage may still apply, but the GC would be responsible for a very high deductible. For many contractors, this can be financially devastating.
This is why it’s critical for general contractors to not only require subcontractors to carry proper coverage, but also to collect and verify certificates of insurance and endorsements before work begins. Otherwise, one uncovered loss could threaten the survival of the business.
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3. How Insurance Companies Charge Depending on Subcontractor Coverage
Premium calculation is another key area where subcontractor coverage (or lack thereof) plays a huge role. Insurers evaluate the risk subcontractors bring to the table and adjust rates accordingly.
If Subcontractors Carry the Right Coverage
When subcontractors maintain the proper insurance coverages—general liability, additional insured endorsements, primary/non-contributory wording, waiver of subrogation, and workers’ compensation—the GC’s carrier charges their costs at a much lower subcontractor rate rather than at the GC’s higher rate.
This creates two important advantages:
• Lower premiums at audit: At the end of the year, your payroll and subcontractor costs are reviewed. If subcontractors carried valid coverage, their costs are rated at the lower subcontractor rate, saving you money.
• Claims protection: If something goes wrong, the subcontractor’s insurance responds first. This helps prevent losses from hitting your policy, keeping your loss history clean and premiums under control.
If Subcontractors Do Not Carry the Required Coverage
If subcontractors fail to carry the required coverages—or the GC cannot produce proof during audit—their costs are charged to the GC’s policy at the higher general contractor rate. This can dramatically increase premiums.
And if a claim arises under these circumstances:
• With a Hard Hammer Clause: The claim could be completely denied.
• With a Soft Hammer Clause: The claim may be covered, but subject to a large deductible or SIR.
In both scenarios, the GC pays more—either upfront in premiums or after a claim through deductibles or uncovered losses.
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Why This Matters for New York Contractors
New York has some of the toughest liability environments in the country, particularly because of its unique Labor Law 240 (Scaffold Law), which holds contractors and property owners absolutely liable for gravity-related injuries. This makes proper subcontractor insurance—and understanding hammer clauses—even more critical.
One uninsured or underinsured subcontractor can:
• Cause your claim to be denied.
• Leave you with crippling deductibles.
• Trigger higher premiums at audit.
• Put your entire company at risk.
In short: contractors cannot afford to take chances when it comes to subcontractor insurance verification.
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How BGES Group Helps Contractors Navigate This
At BGES Group, we specialize in helping New York and tri-state contractors navigate the complex world of liability insurance. We understand the hammer clause provisions that can destroy a business if misunderstood, and we work closely with contractors to:
• Review subcontractor agreements and certificates of insurance.
• Ensure subcontractors carry the required coverages before work starts.
• Structure policies that minimize exposure to hard and soft hammer clauses.
• Educate contractors on how audits affect premiums so there are no surprises at year-end.
• Find the right carriers who understand New York construction risks.
BGES Group specializes in New York construction insurance and workers’ compensation insurance for all industries. We also provide solutions in New Jersey, Connecticut, and through our national associates, can assist contractors across the entire United States.
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Contact BGES Group
If you’re a New York contractor—or a contractor working anywhere in the tri-state area—don’t take chances with hammer clauses and subcontractor risk. Let BGES Group help protect your business and lower your costs.
📞 Contact: Gary Wallach
📧 Email: bgesgroup@gmail.com
📱 Phone: 914-806-5853
🌐 Website: http://www.bgesgroup.com
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Final Word
Hard hammer and soft hammer clauses are not just technicalities buried in your CGL policy—they are real, enforceable provisions that can determine whether your business survives a claim or collapses under the weight of uncovered losses. By requiring subcontractors to carry the right coverages, verifying compliance, and working with a specialist like BGES Group, New York contractors can keep premiums under control, protect their liability coverage, and safeguard the future of their business.