Robert Babcock, Warren G. Bender Co., RCAC Premier Sponsor

There are many General Liability policies that have a subcontractors warranty in them. Ultimately, you must make sure that any subcontractor you hire has the same limits on his policy that you have, or limits that are higher. The subcontractor must also have no torch down exclusion, no roofing warranty limitation endorsement and other endorsements.

If your subcontractor has any of these endorsements or limitations, your policy will not pay for any claims that occur in these areas. This is why it is critical for you to understand all the exclusions and limitations that your current General Liability policy has so you are not caught surprised when a claim happens. It is the responsibility of your insurance agent to review and explain all exclusions so you can make a decision as to whether or not you want to purchase the policy he proposes. You do not want to wait until after a claim happens to discover you do not have the proper coverage in place.

Take a look at these two examples:

Example #1:

A Roofing Contractor was working on a large commercial building and decided to sub out the torch down needed. He did not check the limits of the certificate he received nor did he find out if the sub had coverage to do torch down work. He also did not have a subcontractors agreement signed by the sub at the time of the work because it was such a small job. The sub caused a fire that created over $2,000,000 in damages. The sub had no coverage because of the torch down exclusion. The lack of a sub contract agreement gave the roofer no recourse against the sub, and the claim that should have been covered by the sub was then pushed back to the roofer that hired the sub, wiping out all $2,000,000 of the roofer’s General Liability and Excess limits. The Roofer did have a $1,000,000 Excess Policy but it was not enough to cover all the damage.

You must protect your business by having a subcontractors agreement on your letterhead. Make sure all subs sign this agreement before they walk onto your job. You should always get a certificate from the subs listing your company as an additional insured for protection against any claim they might cause. You should also get clarification that their policy allows your sub to do the work they are being asked to perform.

Example #2:

A Roofing Contractor hired another Roofer to work on a very large private home in Southern California. The Roofer received a copy of the sub’s certificate naming him as an additional insured but did not look closely at the certificate. The certificate read commercial work only, not residential. The sub caused $125,000 in damage to this home that was not covered under his insurance and the Roofer who hired him had to turn the claim into his own insurance carrier for coverage.

It is the simple things that can get you in trouble. Make sure you have the correct coverage in place before a claim happens! Make sure all your subcontractors sign a subcontractors agreement and provide you with a copy of their certificate naming you as additional insured before they step onto your jobsite. If they are going to do some specific work like torch down, make sure their policy will cover that work.

If you have any questions about this or other matters, do not hesitate to call Robert Babcock, Warren G. Bender Co., (916) 380-5347.