Please review this overview regarding subcontractor liability. There has been a large increase in third party lawsuits resulting from subcontractor related job injuries that have resulted in large settlements against General Contractors. Anyone hiring subcontractors needs to have each Subcontractor execute a strong Subcontract Agreement.

  The Standard 2 page Subcontractors Agreement no longer provides the protection Insured’s need in the increasing litigious environment regarding third party lawsuits. Phillips Insurance Agency, Inc. will review your Subcontract Agreement and provide suggestions for improvement. You should at a minimum have the following included in the form you use:

• Additional Insured—Every Sub you hire should name you as Additional Insured on their policies. This is accomplished by adding the requirement to your subcontractor agreement and to a Certificate Of Insurance listing you.  Certificates should be kept current to make sure that they are still in force.

• Minimum Limits—Your Sub Agreement should provide as Sample Certificate with minimum limits required of your sub on their insurance policies. Coverage must include Auto, General Liability, Workers Comp and Umbrella. We can produce a Sample Certificate for you to include in the package you send Subs. All Subs regardless of whether they are Incorporated or Sole Proprietorship with no employees need to carry Workers Comp insurance. Claims filed by either a Sole Proprietor or an employee of one can be put under your Workers Comp policy since the Law gives a very broad definition of “employee”. Therefore when no coverage exists any dollars paid to an uninsured Sub will be assessed to your policy at audit.

• Indemnification Clause—sub agrees to a broad indemnification provision in the event that an incident occurs caused by their negligence.

• Waiver of Subrogation—Subs policies should be endorsed to Waive all Rights of Subrogation in favor of G.C. A waiver of subrogation precludes the insurance company from paying the loss and then going back to seek recoveries from another party. Most AIA subcontract agreements have a mutual waiver of subrogation built into the contract.