What insurance should a subcontractor carry? A GC's guide

When you hire a subcontractor you take on part of their risk. If an uninsured sub's worker is hurt on your site, or their crew damages finished work, the claim can climb the contract chain to the general contractor. This guide covers the coverages GCs usually require, how to set limits and why each one matters. It's written for the person who signs the subcontract.

This is general information, not legal or insurance advice. Your subcontracts, your state and your owners' contracts set the requirements you enforce. Limits below are examples, not recommendations; your owner contract and your broker set the real numbers.

The five coverages

1. Commercial general liability

The foundation. It answers for injury to other people and damage to their property caused by the sub's work: someone trips over their materials, a torch starts a fire, finished work fails and damages what's around it.

Limits are set in three places on the certificate: each occurrence, the general aggregate and the products and completed operations aggregate. For example, a subcontract might require $1,000,000 each occurrence and $2,000,000 for each aggregate.

Two other terms matter as much as the limits. Additional insured status, for ongoing and completed operations, puts your company on the sub's policy for claims from their work. Primary and noncontributory wording makes the sub's policy pay before yours. A certificate with good limits and neither of these can leave you more exposed than the numbers suggest.

2. Workers' compensation and employers' liability

Workers' comp covers the sub's employees when they're hurt on the job. It protects you from an expensive situation: an uninsured sub's injured worker looking up the chain for someone to pay. Many states make a general contractor responsible for an uninsured sub's workers; Virginia's statutory employer rule is one example (Va. Code § 65.2-302). In states that use NCCI's audit rules, your own insurer can also charge you premium on what you paid that sub.

Workers' comp limits are set by statute; employers' liability limits sit beside them on the certificate, and your subcontract sets the minimum. Watch for:

• Owners excluded from their own policy. A sole owner may exclude themselves. That can be legitimate, but know it and decide whether it's acceptable for the work.
• A waiver of subrogation in your favor, so the sub's insurer can't pursue you.

3. Commercial auto liability

If the sub drives to your site, hauls material or runs vehicles on the job, auto liability covers injury and damage from those vehicles. Look for "any auto", or owned, hired and non-owned autos, at the limit your subcontract sets.

Don't skip it for small trades. A sub's pickup used for business can cause a claim that a personal auto policy won't fully answer.

4. Umbrella or excess liability

An umbrella sits over general liability, auto and employers' liability and adds limits once those are used up. On larger commercial projects the owner's contract often sets umbrella limits that flow down to every sub. A small residential remodel may not need one at all.

5. Professional liability, when there's design

If a sub does design-build or delegated design work, such as a fire sprinkler layout or engineered connections, ask for professional liability, also called errors and omissions. A design mistake that causes only financial loss isn't bodily injury or property damage, so general liability may not answer it, and many contractors' policies exclude professional services by endorsement. Subs installing to someone else's drawings usually don't need it.

Matching coverage to the trade

Asking every sub for the same insurance regardless of scope prices out good small subs and creates paperwork nobody enforces. Calibrate:

• Lower-risk trades (painting, final cleaning, flooring): general liability, workers' comp and auto.
• Higher-hazard trades (roofing, steel, excavation, electrical, demolition): higher limits, an umbrella and close attention to completed operations.
• Design-build or delegated design (fire sprinklers, pre-engineered metal buildings, some mechanical, electrical and plumbing work): add professional liability.
• Environmental exposure (abatement, spray foam, anything touching hazardous materials): consider contractors pollution liability, because the standard general liability policy excludes most pollution claims.

For how requirements vary by state, see subcontractor insurance requirements by state.

Before a sub starts

1. Collect a current certificate listing every required coverage and limit.
2. Compare the limits with your subcontract, including anything flowed down from the owner.
3. Confirm additional insured status for ongoing and completed operations, with the endorsements.
4. Check for primary and noncontributory wording and the waivers of subrogation.
5. Read the policy dates. A certificate is a snapshot, and coverage can lapse the week after it's issued.
6. Ask about exclusions that would gut the coverage you're relying on, such as height or specific-operation exclusions.
7. Check the certificate holder is your legal entity.
8. Set a reminder before the earliest expiry date.
9. File the certificate with the right project and subcontract.

Collecting is the easy part

A certificate shows coverage on the day it was issued. It doesn't show that the policy is still in force, that the endorsements are attached or that earlier claims haven't used up the aggregate. Treat certificates as records you re-check at every renewal.

TradeGuard reads each certificate as it arrives, checks it against your requirements, tells you when the additional insured it names isn't you and asks subs for renewals before their dates arrive.