Sub Contractor insurance coverage

Are you a contractor using subs?  Screening their insurance to make sure they have the right coverage and you’re protected? For any contractor using subs this article is a must read!

Sub Contractor insurance coverage

Are you a contractor using subs?  Screening their insurance to make sure they have the right coverage and you’re protected?  Does your General Liability Policy cover you in the event a sub causes bodily injury or property damage and has the wrong insurance?

Most subcontractors carry sub par liability insurance.  The reasons vary but the big one is “They Do Not Want To Pay for a Good Policy.”  That works well for the subcontractor until there’s a claim.  Then the headaches begin for YOU.

We screen a lot of subcontractors insurance.  Over 50% have horrible coverage.  Exclusions such as labor law, employee injury, contractual liability, height limitations, exterior work, restrictions as to work you can perform, subcontractor coverage requirements, the list goes on and on.

How many of you believe insurance companies are charitable and will bend over backwards to pay a claim?  Forget it!  They have so many exclusions in their policies they are designed not to pay claims.

There’s a “Black List” that names 15-20 insurance companies whose policies have all sorts of exclusions (contact us and we will email you one).  Many property owners, real estate managers and general contractors have this list.  When screening, if they see company listed, they tell sub their insurance is no good and they cannot work until they get better coverage.

For New York contractors, depending on what you do and what county(s) you work in, you may fit into a “Main Street” insurance company’s policy.  If so, you should have no policy issues conducting business with customers.  However, if you’re with a “Surplus and Excess Lines Carrier,” and most New York City borough contractors are, you may have coverage exclusions and restrictions which hinder you from doing business with customers.

It is very important, to avoid an uncovered claim, to screen your subcontractors insurance.  Equally important is to have a written hold harmless and insurance agreement in place (we have a sample agreement that is excellent.  Contact us and we will email you one) for each sub.  Based on our experience, at least 50% of contractors are not screening their subs insurance correctly.  They have no written agreements and their subs have inadequate insurance.   What they DO NOT understand is if there’s a claim, THEIR OWN insurance may decline coverage.

When your policy comes up for renewal and you’re seeking new quotes, if you do not have proper risk transfer mechanisms in place, and companies want proof that you do, most insurance companies will not quote your account.  That will leave you with a “Black Listed” carrier or pricing that is exorbitant.

In addition, your new policy may have a “Hammer Clause.”  What this means is if your subcontractor causes an accident, you get sued, you do not have proper documents in place, there will be NO coverage under YOUR policy.

What are the basic coverages you should be looking for when it comes to your subcontractors?  To start, they should have at least $1,000,000 liability limit, $2,000,000 general aggregate.  Depending upon type of work (i.e. wallpaper versus masonry), they should have at least a $1,000,000 Umbrella Liability Policy.  Their Business Auto and Worker’s Compensation coverages should be listed on certificate too.  You want to make sure they have “Contractual Liability” and that they DO NOT have “Employee Injury” or “Labor Law” exclusions. Regarding their general liability coverage, your company should be listed as an “Additional Insured,” waiver of subrogation and primary/non contributory coverages should be listed on certificate too.  These coverages are a starting point.

Lets take a break from discussing liability insurance.  We want to point out a VERY SERIOUS PROBLEM contractors working out of state may have.  Many have their workers compensation through state or assigned risk plans.  State plans provide workers compensation according to that state’s workers compensation benefit laws.  If an employees working out of state gets injured and files claim in that state, usually there’s no coverage.  Employees file claims out of state because of convenience or money.  For example, a N.Y. contractor takes a job in New Jersey.  Job will take 2 months.  Employee gets injured.  Lives in N.J. so he seeks benefits and medical care in N.J.  He hires an attorney to help him get whatever he’s entitled to.  Do you really want to be sued for $50,000, $100,000 or more and have your employee’s attorney contacting you for years?

How To Get Help

Most insurance agencies sell a policy then the only time you hear from them is when you need a certificate.  They’re not helping you screen subs.  They’re not helping you check sub policies.  Most  are clueless as to the restrictions and exclusions in your liability policies (General & Umbrella).  We see many agencies selling “Black Listed” policies.  They work until you try to do a job for a savvy customer who says we cannot accept your coverage or a claim occurs.

There is a way to get custom designed coverage at competitive pricing.  If you could market your account to up to 50 insurance companies, do you think one of them could offer you better coverage/pricing? 

At BGES Group, we have access to 50 insurance companies that insure contractors.  Every day our organization markets 5-10 contractors so we have a great pulse on the marketplace.  In addition, we offer a Worker’s Compensation program designed for contractors.  Pricing is great, coverage coverage enhancements included, can cover you in multiple states, no renewal deposit, payroll classified correctly, payroll caps applied correctly, you can obtain certified payroll reports, premium lowered when  business is slow, simplified audits.

If you want to have your insurance reviewed by one of New York’s leading construction insurance specialists, just pick up the phone and call 914-806-5853, ask for Gary Wallach.  His email address is

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