Sub-contractor's insurance liabilities

Times are tough for the 2.2 million people employed in the British construction industry.  Along with increased financial pressures they also face working in one of the most dangerous and physically challenging industries.  Even with the strictest health and safety regimes, accidents can happen. Employers have a duty of care to ensure that both staff and public safety are priorities. They also have responsibilities to their shareholders and partners to financially protect them should the worst happen. 

In the event of a third party claim against your business your public liability insurance should protect you financially. However what happens if your business was not responsible for the accident and your sub-contractors are at fault.  Who is liable then? If your sub-contractor’s insurance policy is not up to the required levels it could still be you. Furthermore, your business’ insurance policy may not cover the costs.  Building contractors need to be sure that their sub-contractor’s liability insurance meets the requirements set under their own insurance policy or they may find themselves exposed. It is better to be safe than sorry. Here are a few checks to help you protect your business:

• Ask for confirmation of your sub-contractor’s insurances. Take a copy of their ‘To whom it may concern’ insurance letter. The requirement to check sub-contractors' insurance arrangements is a condition of main contractors’ policies.
• Check the limit of indemnity is at least equal to that required for sub-contractors under your insurance policy and/or the specific contract
• Check the following are correct:
  – The sub-contractor’s name including any associated or subsidiary companies
  – The activities defined in their business description include the work you are contracting them to complete for you
  – The insurance period is current and valid
  – The insurer's name
• Encourage your regular contractors to seek insurance from an insurer with a good credit rating

If the sub-contractor’s policy has lapsed since the last contract you could be left unprotected so carry out these checks every time you engage the sub-contractor on a new contract. While this may seem onerous, it could save your business in the event of a claim. As a minimum you should ensure you complete these checks annually.  Finally, if a sub-contractor is not insured then they should not be employed until they are. The main contractor and the building contract requires insurance for sub-contractors to be in place.

Last reviewed 7/11/2011

To talk to an expert in your area and get a quote, contact your local insurance broker.