It’s important to note that a General Contractor (GC) is responsible for work performed on their behalf by a subcontractor. In the event a GC hires an uninsured subcontractor, the GC cannot effectively transfer their risk to the subcontractor. This leaves the GCs in a vulnerable position since they could be held liable for damage caused by the uninsured subcontractor and deemed responsible if a subcontractor’s employee is injured on the job. When a GC hires an uninsured subcontractor, they take on the responsibility of covering these workers as their own employees. So, at audit, naturally, the insurance carrier will want to charge the GC for the subcontractor’s “coverage.” Some liability policies specifically exclude coverage if a subcontractor is hired that doesn’t maintain insurance equal to that of the GC’s coverage.
How this can impact a GC’s workers compensation policy:
- Additional premiums due at Audit
- Possibility of putting the business’s financial strength at risk
- A possible increase at renewal in insurance premiums (or denial of coverage)
- Increased loss exposure which could affect your Experience Mod
How a GC can control this exposure:
- Do homework on the subcontractor; know who you’re hiring
- Ensure a proper subcontractor’s agreement is in place
- Institute a certificate tracking and risk transfer program
- Consult with an attorney and insurance agent specializing in construction
