A construction contractor typically hires subcontractors for various projects. Subcontractors may be considered a resource for your business as they help you achieve your required construction goals. However, if not properly insured, a subcontractor can be a significant liability for your business.
After all, your clients will sue you for the mistakes of the subcontractor and your contractor insurance may not cover you in such cases.
To help reduce litigation risk for your business, we have developed a checklist of things to consider when working with subcontractors.
1. Develop a thorough contract
The first step is to have a legally binding contract that identifies the responsibilities of the subcontractor, that clearly states time-bound tasks to be completed and the allocated budget for each task.
2. Set and check insurance requirements
As a contractor looking to hire a subcontractor, you can specify exactly what type of insurance is required. Then, check the insurance certificates of your subcontractors to validate that they, in fact, have the appropriate types of insurance. The insurance certificate lists the policies a contractor has, the coverage amount, limits, and relevant expiration date.
3. Check licenses
Ensure that your subcontractors have the appropriate licenses for their type of work. You can request copies of the license, or there may be some way to directly check with the licensing bodies. The insurance contract requires that sub-contractors be licensed, so validating licensing is critical to fulfilling your insurance requirements.
4. Check for ‘bonding’
A ‘bonded’ contractor is on that has a permit bond. This bond ensures that the contractor will adhere to the building code and safety guideline requirements as set by law. If the contractor fails to produce work that complies with these laws, you can seek damages against the bond.
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