If you hire a subcontractor, implement these 3 requirements when you request a certificate of insurance. This helps protect your business from insurance claims against your own policy when your subcontractor is at fault.
1. Always request a copy of the additional insured endorsement with the certificate of insurance.
Why: If you read a certificate of insurance, it states:
if the certificate holder is an additional insured, the policy(ies) must be endorsed.
If your subcontractor’s insurance policy does not contain you listed as an additional insured (or a blanket additional insured endorsement) you are not provided coverage.
2. Always have your subcontractor sign a subcontractor agreement. It does not need to be long, but certain language should be included, such as:
Contractor shall be named as additional insured for Ongoing Operations and Products/Completed Operations on the Subcontractor’s Commercial General Liability policy, which must be primary and noncontributory with respect to the additional insureds.
It is expressly understood that any insurance obtained by Contractor is deemed excess, non-contributory and not co-primary in relation to the coverage(s) procured by the Subcontractor.
A Waiver of Subrogation Clause shall be added to the General Liability, Automobile and Workers’ Compensation policies in favor of the Contractor.
If you need a subcontractor agreement, contact us at Insurance Force, and we will gladly forward you a sample.
Why: Most additional insured endorsements will provide additional insured status only when obligated by valid written contract to provide such coverage. Without a written contract, you are not provided coverage under their policy.
3. Request the subcontractor to endorse the policy to state expressly, in the policy itself, that the certificate holder will receive the same notice of rights as the named insured. Ask for a notice of cancellation endorsement.
Why: The notice of cancellation provision changed. The old provision read:
Should any of the above described policies be cancelled before the expiration date thereof, the insurer will endeavor to mail __ days written notice to the certificate holder in the event the insurance policy is cancelled.
ACORD (the Association for Cooperative Operations Research and Development), who produces the certificate of insurance form, eliminated the notice requirement from the cancellation text. The revised certificates now states:
Should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.
Unless the policy has a notice of cancellation provision (which is not standard) you can have a subcontractor’s policy cancel without your knowledge, which means it becomes your problem.
The subcontractors you hire may show some resistance to meeting these 3 requirements. But if you make this a part of your office policies and procedures and not remit payment until these requirements are met, you will find your subcontractor will get you the required documentation. Without it, you are simply adding your subcontractor to your insurance policy which increases your exposure and the chance a claim will be filed against your policy.
We provide our clients an email template and subcontractor agreement they can use which outlines all the requirements and instructions. If you have any questions, please do not hesitate to contact us.