In today’s construction industry, subcontracting work is an essential part of getting the job done efficiently. Whether you’re a general contractor managing multiple trades or a specialty contractor bringing in support, subcontractors help projects move forward on time and within budget.
But there’s a major risk many contractors aren’t aware of—or are ignoring. The assumption that your General Liability (GL) and Umbrella Liability policies automatically cover damages caused by your subcontractors can be a fatal flaw in your risk management strategy. If your subcontractors are not in full compliance with your policy’s insurance requirements, you could be personally liable for accidents and claims. That mistake could cost you your business.
Let’s take a closer look at how today’s insurance companies are changing the rules—and what you must do to protect yourself.
Understanding the Risk: Subcontractor Liability Exposures
Most contractors believe their own insurance policies provide a safety net for subcontractor-related incidents. Unfortunately, that’s only true if specific—and often strict—conditions are met.
Insurance carriers today are including powerful contractual provisions in their liability policies, especially for New York contractors. These provisions spell out, in fine print, exactly what you must do to be eligible for coverage in the event of a subcontractor-related claim.
These provisions are no longer suggestions—they are requirements. And failure to comply with even one of them can result in a total denial of your claim.
What Is a Hard Hammer Clause?
A growing trend in the insurance market is the use of what’s known as a “Hard Hammer Clause.” Think of this as the insurance company’s way of saying: “We’ll only cover you if you’ve done everything exactly right.”
Under a Hard Hammer Clause, your insurer won’t hesitate to decline a claim if you haven’t met every subcontractor insurance requirement in your policy. That means even one missing certificate of insurance, one subcontractor with inadequate coverage, or one unsigned agreement could leave you without protection.
What Do These Agreements Require?
So what exactly are these subcontractor insurance requirements?
If you’re working under a General or Umbrella Liability policy with a Hard Hammer Clause, here’s what you are typically required to obtain from each and every subcontractor you hire:
1. Hold Harmless and Insurance Agreement
You must have a written, signed, and dated agreement in place before work begins. This agreement must:
- Include an indemnification (hold harmless) clause stating the subcontractor agrees to protect you against claims resulting from their work.
- Clearly outline the insurance coverages and minimum limits they are required to carry.
Warning: Many subcontractors do not carry adequate coverage or use outdated agreements. Using the wrong form or working without one puts you at risk.
2. Minimum Liability Limits
Subcontractors must carry at least $1,000,000 in General Liability limits—often more depending on the job. Some policies require higher limits or additional Umbrella coverage for specific trades.
3. Certificates of Insurance (COIs)
You must obtain a current COI from each subcontractor that includes:
- Your company listed as an Additional Insured
- Waiver of Subrogation in your favor
- Primary and Non-Contributory wording
- Policy dates and limits that match the contract
Don’t just file these certificates—review them. Many contain incorrect or missing information that invalidates coverage.
4. Contractual Liability Coverage
The subcontractor’s policy must include Contractual Liability, which covers the indemnification obligations they’ve agreed to in your contract.
5. Labor Law Coverage (NY Specific)
For New York contractors, this is crucial. Your subcontractors must have coverage for Labor Law 240 and 241 claims (scaffold and fall-related injuries). Without this, your insurance will not respond, and the courts may hold you fully liable.
6. Primary and Non-Contributory Coverage
This provision ensures the subcontractor’s insurance responds first and in full, before yours. Without this, your policy could be dragged into claims it wasn’t designed to handle.
7. Waiver of Subrogation
This prevents the subcontractor’s insurer from suing you to recover their losses. It’s a standard risk transfer mechanism, but must be properly documented.
Compliance Isn’t Optional—It’s Essential
The harsh reality is that insurance companies are no longer lenient when contractors fail to meet these requirements. If an accident occurs and your subcontractor is uninsured, underinsured, or has missing documentation, your insurance carrier may deny your claim outright.
That means you could be on the hook for:
- Medical bills
- Legal fees
- Judgments or settlements
- Lost time and revenue
- Permanent damage to your company’s reputation
A Better Way: Let BGES Group Handle It for You
Keeping track of these requirements is no easy task. Most contractors don’t have the time or technical knowledge to manage this in-house. And most brokers sell the policy and move on—they don’t stay involved to help you maintain compliance.
That’s where we come in.
At BGES Group, we specialize in working with contractors to not only get great insurance policies—but to make sure they stay protected year-round. We offer support with:
- Policy reviews
- Subcontractor agreement templates
- Certificate tracking and compliance
- Access to specialty insurance markets
- Ongoing risk management support
Examples of Real Savings
We’ve helped countless contractors improve their coverage and reduce costs. Here are just a few examples:
- NYC Contractor: Saved $100,000 on General Liability and Umbrella premiums.
- Queens Contractor: Increased Umbrella limit from $3 million to $5 million and reduced premium from $103,000 to $78,000.
- Upstate Demolition Company: Replaced a $3 million Umbrella costing over $50,000 with a $5 million Umbrella for just $23,000.
What Clients Say About BGES Group
Here’s what contractors are saying about working with us:
“Gary Wallach and his team are the best. They saved me thousands of dollars and made the whole process painless.”
“Exceptional customer service! I never have to wait for answers, and they’re always on top of my account.”
“Their program is a game-changer. The group health option has been a huge bonus for my employees.”
“The personal touch from BGES Group is unmatched. They treat you like family and truly care about your business.”
Free Policy Review and Resources
We’re offering a FREE policy review to help you understand your subcontractor-related exposures. We’ll also provide you with a sample Hold Harmless and Insurance Agreement at no cost (just have your attorney review it before use).
Ready to Get Protected?
Don’t wait until a claim hits to find out you’re not covered. Protect your business by taking action now.
📞 Call Gary Wallach at 914-806-5853 🌐 Visit us at www.bgesgroup.com 📧 Email us at bgesgroup@gmail.com
BGES Group – Insurance Protection Built for Contractors Who Can’t Afford Mistakes
Serving contractors throughout New York, New Jersey, and Connecticut.