Hiring an uninsured subcontractor exposes your company to tremendous risk. This responsibility may have a significant impact on your workers’ compensation premium.
Workers’ compensation programs are regulated and managed on a state-by-state basis throughout the United States. Except for Texas, every state requires employers to provide workers’ compensation insurance to injured employees. The employer is nonetheless liable for the employee’s injury under the law. Subcontractors are autonomous business entities, not employees, of your firm or organization. As a result, workers’ compensation insurance for subcontractors is not required.
Business owners, on the other hand, must have confirmation that a subcontractor is covered by workers’ compensation and must verify its validitywhy. here’s
If a subcontractor does not have its own workers’ compensation coverage, the subcontractor’s employees will be listed as an uninsured subcontractor on your workers’ compensation policy when it is audited, and you will be charged a premium for their payroll.
Uninsured subcontractors can have a substantial impact on your loss history and workers’ compensation rates in the future, in addition to the increased premium needed.
Many states have ruled that the general contractor is liable for the losses of any uninsured subcontractor’s wounded employee. If a subcontractor’s employee is hurt on the job and the employer does not have workers’ compensation insurance, the medical bills and lost earnings may be covered by the affiliate’s workers’ compensation coverage. Prior losses like these have a direct impact on your insurance rates, and increased workers’ compensation premiums will result.
To avoid these headaches, make sure that every subcontractor you engage has the necessary insurance coverages in place, as well as a workers’ compensation certificate of insurance, before they start working on the project.
Do subcontractors need their own insurance?
What Are the Benefits of Subcontractor Insurance? Working as a subcontractor is similar to running your own small business. Because the person or corporation who hired your services will not cover the costs of such a claim, any subcontractor should have their own public liability insurance.
Does my insurance cover my subcontractors?
- Labor-only subcontractors are more akin to temp workers. You provide their tools and equipment, keep track of their timesheets, and give them a paycheck.
- True subcontractors, on the other hand, are significantly more self-sufficient. They have their own tools and equipment, they bill for the work they do, and they work independently of you.
Labor-only subcontractors are usually covered under your existing Public and Employers Liability insurance plans, as long as you notify your insurance provider of the additional staffing.
When you hire genuine subcontractors, you take a risk. They are not covered by your insurance and will need to set up their own before starting work for you. Insurers must be made aware of these issues because there is still a tiny risk. It is imperative that you examine their cover.
Background
A property owner named Willmott Dixon Construction Limited (Willmott Dixon) as the main contractor for two properties in Clapham, London. Following that, Willmott Dixon hired Robert West Consulting Ltd (Robert West) to design the underpinning for a gable wall that was shared with another property on the same street. Toureen Contractors Ltd was hired by Willmott Dixon to do the underpinning (Toureen).
The underpinning is said to have caused damage to the party wall. Willmott Dixon filed a claim against Robert West in 2015, stating that Robert West’s design was flawed, causing the project to be delayed and leading Willmott Dixon to lose money.
One of Robert West’s defenses was that the party wall damage was caused in part by Willmott Dixon’s contributory negligence, based on the fact that Willmott Dixon’s subcontractor (Toureen) was negligent.
Contributory negligence and sub-contractors
Contributory negligence is a defense based on tortious concepts (rather than the law of contract). A general rule of contributory negligence is that a main contractor is not liable for its independent subcontractor’s negligence.
- The principal contractor was aware that the subcontractor’s work was done in an unpredictably unsafe manner and chose to ignore it.
- The principal contractor owes a “non-delegable obligation,” which means that even if the work was done by Willmott Dixon’s sub-contractor, Willmott Dixon owed a duty to ensure that the job was done carefully.
Robert West’s contributory negligence defense was initially based on the first of the foregoing exceptions, which it confirmed in its response to Willmott Dixon’s Request for Further Information in December 2015. It also stated that Robert West did not suggest that Willmott Dixon was vicariously liable for the alleged carelessness of the subcontractor.
Robert West, however, asked for leave to alter this response more than a year later, and six weeks before trial:
- Remove the statement that Robert West did not claim Willmott Dixon was vicariously liable for Toureen’s alleged carelessness, implying that Robert West did claim Willmott Dixon was vicariously liable for Toureen’s alleged negligence.
- Add a new accusation that another exemption to the general rule that a main contractor is not liable for its independent subcontractor’s carelessness occurs when the subcontractor is tasked with work that involves the removal of support from a neighboring property.
Willmott Dixon turned down the application, therefore Robert West took it to court. Due to the lateness of the amendment, Robert West was required to show that the new charge had a reasonable chance of success. As a result, the Court gave the modified application careful consideration.
The Court’s decision
The Court denied Robert West’s claim, finding that his charges lacked merit and were “an imaginative but unjustified attempt to hold the primary contractor vicariously accountable for the acts or omissions of its independent subcontractor.”
The argument that Willmott Dixon may be held vicariously accountable for Toureen’s claimed negligence was promptly disregarded by the Court. Vicarious liability in tort means that a person can be held accountable for another person’s breach of duty on public policy grounds. This can be encountered in the workplace and other similar situations. The Court, however, decided that it did not apply to independent subcontractors.
The question was whether Willmott Dixon owed Robert West a “non-delegable duty.” In this case, Robert West relied on two arguments:
The case of Honeywill and Stein Ltd v Larkin Bros1 KB 191 established this principle. In Biffa v MaschinenfabrikQB 725, however, the Court of Appeal slammed this premise. The Court reiterated that this approach should be “viewed with considerable caution” in analyzing Robert West’s claim, concluding that a non-delegable duty cannot exist unless the works are extraordinarily or abnormally risky, regardless of the safeguards adopted (beyond what would be expected generally on a construction site).
Removal of support by the owner of one property, resulting in damage to another.
The Court rejected this on the grounds that withdrawal of support rights is a distinct notion from the one under consideration here, and that it is more likely to arise as a nuisance claim than as a negligence claim. Furthermore, the Court determined that Robert West’s argument on that point was irrelevant to the case because the non-delegable responsibility only arose between owners of adjacent land. The property was not owned by Willmott Dixon or Robert West.
In any case, the Court ruled that this was irrelevant because the claim of contributory negligence is based on Wilmott Dixon’s failure to take reasonable precautions to protect itself. There would be no strict liability or non-delegable duty due to others as a result of Toureen’s actions or omissions in this case.
As a result, the Court agreed with Willmott Dixon and determined that Robert West’s changes should not be permitted.
Lateness
Even if Coulson J agreed with Robert West that Willmott Dixon had subcontracted a non-delegable task and was thus accountable, the revision to its first responses was only communicated a few weeks before trial without explanation, rendering it too late and inadmissible, according to Coulson J.
Key lessons
This case serves as a valuable reminder of when a major contractor is and is not accountable for the conduct and omissions of its subcontractors, as well as the fact that a primary contractor is rarely liable in tort. However, such issues can be avoided through the contract for example, parties can simply include a phrase in the contract stating that the main contractor is responsible for any acts and omissions of its subcontractors.
Do subcontractors need their own public liability?
A bona fide subcontractor (BFSC) is frequently hired as part of a larger contract to accomplish a specialty job that neither you nor your personnel are qualified to do. For example, if you’re a builder working on a new home, you might hire plumbing, electrical, or roofing experts to complete specific tasks.
True subcontractors will labor without oversight or guidance from you on a specific task. They’ll also bring their own supplies and equipment to the job location. Payment would be made by invoice or fixed price contract because they were employed for a specified job.
True subcontractors should have their own liability insurance as self-employed professionals. You’ll need to make sure that any legitimate subcontractors you hire have public liability insurance with a level of indemnity equal to or greater than yours, and that it covers the task you’ve hired them to execute.
Why do subcontractors need public liability insurance?
When you work for a general contractor, you may find yourself in the construction industry, where you could find yourself in a variety of scenarios. If you are hired to do some bricklaying work, you risk dropping a brick on someone’s head and injuring them. As a result, public liability insurance is required.
It protects you against any unexpected costs incurred as a result of harming or damaging someone’s property while on the job. Subcontractor public liability insurance is optional, however it is recommended to assist protect your or your company’s financial future.
- You’re conducting some plumbing work when you bust a pipe, causing water damage to the house.
This coverage is optional, but it is worthwhile because of the potential incidents it covers. Furthermore, if you own tools or equipment, you may want to consider purchasing tools insurance to protect them in the case they are lost or stolen.
What is sub contractors insurance?
Your line of work exposes you to risk, from the equipment you rely on to the other individuals on the job. Starting with public liability coverage, subcontractor liability insurance is designed to assist you if someone is injured or property is damaged as a result of your operation. Coverage for your tools and equipment, as well as personal accidents, can be added.
Why do contractors need public liability insurance?
This is the most common type of insurance for a craftsman or trades company that works as a contractor or subcontractor.
Many contracts will indicate that you must obtain public liability insurance, and they may even specify a minimum level of coverage.
If no minimum is specified, you can use the $5 million minimum available, or the contract may specify a greater sum of $10 million or $20 million.
What’s the use of having your own public liability insurance?
It’s because you’re responsible for your own activities as a contractor.
You are liable if your negligence causes property damage or personal injury to a third party.
Because the company or person you’re working with isn’t responsible, their public liability insurance won’t cover any such claim.
As a result, it’s critical for contractors to have their own public liability insurance, not only because many contracts need it, but also because not having insurance exposes you to significant financial risk.
Contractors’ public liability insurance is normally inexpensive, though the cost will vary depending on your business activities and size.
Coverage for most trades is available for under $500 per year for $5 million protection for a small contracting business (1-2 persons) in the residential building industry.
Can I be sued by a subcontractor?
A subcontract is a separate contract entered into by a party (the main contractor) to a contract (the main contract) in which the main contractor agrees to have another person (the subcontractor) perform their obligations under the main contract in exchange for payment.
In general, if the subcontractor performs everything that the main contractor agreed to accomplish under the main contract, the other party to the main contract must accept the subcontractor’s performance.
Subcontracts can thus be a useful tool for outsourcing contractual responsibilities to a third party.
The main contractor is still responsible for the performance of the main contract, which means it is liable to the other party to the main contract for any subcontractor default. Similarly, unless the other contractual party has a tort claim or a direct third-party right, the other contracting party is not normally permitted to sue the subcontractor for breach of contract.
What are subcontractors responsible for?
What is a subcontractor if a contractor oversees the construction site? A subcontractor is someone who works for a contractor. The following is how it works:
- The contractor hires Company A to put in the roof and Company B to construct the walls.
Company A and Company B, in this case, work for the contractor. You, the client, are the contractor’s client. Company A will be in responsibility of the roof installation, while Company B will be in charge of the wall construction. In essence, a subcontractor will fulfill all or portion of the contractor’s contract obligations.
A subcontractor can be a person or a company. In most circumstances, they are regarded independent contractors rather than employees of the contractor. They may be responsible for providing their own materials and equipment for the task they are engaged for, depending on the Subcontractor Agreement.
Subcontractors are the workers, whereas contractors are the supervisors. They usually specialize in a single field, allowing them to accomplish your job fast and correctly. Hiring subcontractors provides contractors with a number of advantages, including the reduction of project risks and the overall cost of the project.
To finish a construction project, contractors and subcontractors work together. The contractor serves as the project’s manager and organizer, acting as the project’s key point of communication and coordination. The job is finished by the subcontractors.