Understand Hold Harmless Agreement
First, your insurance company needs a contract stating that you have requirements for insurance that subs have to hold when working for you. One would be ensuring they have a Hold Harmless Agreement inside their agreement with you. Hold Harmless Agreement is set up to protect you in case they have a claim on your job so they won’t come back and try to subrogate from you. So they’re holding back from harming you and your company. It’s a critical piece, and all the insurance companies require you to have a Hold Harmless Agreement, and that’s just one of the things inside the agreement you need to have. Another one is that they have you as a certificate holder inside the contract. That means that your company is named on their certificate that you require them to give you before starting the work on the job.
Why Do I need the Certificate of Insurance to Manage Risk
So if an issue arises, you can give that certificate to your insurance company to go over to the subcontractor’s insurance company and argue that they’re responsible. The big piece is all about risk management; if we have an excellent agreement with all the insurance requirements needed for your insurance company to protect you, they can move the risk from you to the sub. This is normal in the business. This is what’s required for you and for your insurance company to protect you in the best ways. It’s good for your clients; it’s good for everyone. If those subcontractor agreements have the standard insurance requirements, list your company as additional insured, have you as a certificate holder, and include the Hold Harmless Agreement.
What Type of Insurance and Limits Should the Subcontractor Carry
Those are the three things that need to be in there. They are required to carry workers’ comp, the liability insurance at certain limits, and usually at the same limit your company has for at least a million dollars. These are just standard requirements, but many people ask me, “Hey, why do I have to have a subcontractor agreement with all these insurance requirements in my sub agreement? Why aren’t we talking about the job? Why aren’t we talking about the work they’re going to do?” That’s in there too? Don’t get me wrong. But the idea is to ensure that your contract has the necessary insurance requirements to protect you from getting sued by your subcontractors and allow the subcontractor’s insurance not to come back and have to subrogate from your insurance.
And that’s happening a lot, especially with general contractors, where they say, like on a worker’s comp claim, “Hey, the subcontractor’s employee got injured here, but at the same time, it was the GCs fault because the work site wasn’t safe enough for the subcontractor’s employee.” And so they will come back after the GCs insurance to say, “Hey, we wanted to be subrogated because this isn’t just the subcontractor’s fault.” So we need to get the agreements figured out. They must have the correct wording and the proper insurance to protect you and your client because they ultimately need to be protected from your insurance and the subcontractor’s insurance.
Have Excellent Subcontractor Agreements To Protect you and your Clients
I could talk about this for a long time, the importance of having an excellent subcontractor agreement in place with the insurance information on there, and I have samples of those agreements if you want to know what the wording looks like. You should have a legal advisor who will help you with your contracts. We need to ensure they have the required insurance requirements because often, I send the subcontractor agreements out to the underwriters to look at, and they’ll kick it back and say, “Hey, we don’t have the required basic insurance requirements on the sub-agreement.”
So this is an explanation: if anybody comes back to you, your broker comes back to you and says, “They’re rejecting your sub agreement. It doesn’t have the insurance requirements in it.” This should hopefully help you understand what they’re looking for and why. And then you could go to somebody and say, “Hey, I need to add this verbiage into my agreement, so I’m protected better, and my insurance will work correctly.” Thank you so much. I hope that helped. Please contact or email me with any questions about this subject matter. Thanks.
