Properly Sub-Contracting and your Liability Policy

Sub-Contracting

All commercial General Liability Policies for contractors include some sort of sub contractor warranty. Basically what it means it that the carrier is requesting and you have agreed to establish the two pathways for your carrier to get to the subs insurance company. And this is why if you break down the actual cost of your policy the charge for subcontracting is a fraction of what is charged for you and your direct or leased payroll.

The pathways are:

An additional insured endorsement from the sub

And use a sub contractor agreement with hold harmless/indemnification language. Your sub will be holding you harmless and indemnifying you for his liability.


Now, having said this please look at the two sub warranties below and see which you’d rather have in your policy in case you goofed up establishing the proper sub relationship.

Sample 1

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

INDEPENDENT CONTRACTORS


The insured hereby represents and warrants that:

1. Commercial general liability insurance coverage for “bodily injury” and “property damage” will be required for all contractors and subcontractors performing work or operations on behalf of any insured; and the insured shall obtain certificates of insurance from all contractors and subcontractors performing work or operations on behalf of any insured. Such insurance will be in effect during the duration of the time work is being performed on behalf of any insured; and that

2. The insured will be named as an “additional insured” on the required coverage’s described in Item 1. above and that

3. The minimum limits and coverage’s thus required of all contractors and subcontractors performing work or operations on behalf of any insured shall be:
REQUIRED LIMIT COMMERCIAL GENERAL LIABILITY FORM
$1,000,000 General Aggregate
$1,000,000 Products/Completed Operations Aggregate
$1,000,000 Each Occurrence
4. Any coverage that might otherwise exist under this policy for claims against any insured based on work done for or on behalf of any insured by a contractor or subcontractor is expressly excess over, and will not contribute with, the insurance required under this endorsement. No duty to defend or indemnify any insured under this policy for any claims that are or should be covered under the policies required of contractors and sub-contractors under this endorsement will exist absent exhaustion of all such contractors’ and subcontractors’ policies.
The insured understand that this insurance policy has been issued upon these representations and warranties.


Named Insured: ________________________________________________________________
Policy Number:________________________________ Effective Date: ___________________
(The above information is required only when this form is added after the policy is issued)



Sample 2

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY

Independent Contractors Endorsement

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE FORM

PRODUCTS/COMPLETED OPERATIONS LIABILITY COVERAGE FORM


The following condition is added to SECTION IV – COMMERCIAL GENERAL LIABILITY CONDITIONS section of the policy:

Prior to the commencement of any work performed on your behalf, you will obtain the following:

1. Written agreement with each independent contractor indemnifying and holding you harmless for “bodily injury” or “property damage” sustained by a third person, and

2. Written agreement with each independent contractor indemnifying and holding you harmless from liability arising from injuries to that independent contractor and/or the employees of any independent contractor, and

3. Certificates of insurance from each independent contractor evidencing the following coverages and minimum limits of liability

 Commercial General Liability coverage with an insurance carrier rated A- or better by A.M. Best

$1,000,000 Combined Single Limit each occurrence
$1,000,000 General Aggregate
$1,000,000 Products/Completed Operations Aggregate

 Worker’s Compensation coverage as required by the jurisdiction in which services are performed.

4. For the period in which services are performed on your behalf by each independent contractor, you must be named as an additional insured on each independent contractor’s Commercial General Liability Policy.
Failure to comply with the Special Condition does not alter the coverage provided by this Policy. However, should you fail to comply, a premium charge will be made. The premium charge will be computed by multiplying the “total cost” of all work sublet that fails to meet the above condition, by the rate per $1,000 payroll for the applicable classification of the work performed.

If the policy does not contain the applicable classification and rate, we will multiply our usual and customary rate per $1,000 of payroll for classification, by the net modification factor, if any, applied to the policy rates. “Total cost” means the cost of all labor, materials, and equipment furnished, used or delivered for use in the execution of the work, and all fees, bonuses or commissions paid.



I am going to guess you’d like sample 2.

Call me,

Mike Wise