If you have subcontractor working for you, you have to make sure that he has appropriate and adequate liability insurance to protect himself and you from claims for bodily injury or property damage. As a general contractor, you may not worry too much about your subcontractor having liability insurance because you have one to protect yourself.
What if your subcontractor does not have liability insurance? You may not believe it but it can pose a serious problem for you. Your liability insurance will only protect you from the consequences of your own negligence. This does not cover the possibility of getting sued and paying for the negligence of your subcontractor or the people working for your subcontractor.
When your subcontractor is negligent and someone gets hurt or injured, they will be looking for compensation. If the subcontractor does not have liability insurance, they will look at you to pay them for the damages or injury. An injured employee cannot sue the subcontractor for negligence. All he can do is collect workers’ compensation. However, he can sue the general contractor, that is you, for negligence for failing to supervise the subcontractor. That is why a subcontractor needs a liability insurance and this must be mentioned in the contract you sign with him so that you are reimbursed any money you pay from claims arising out the subcontractor’s work.
However, putting an indemnification clause in the contract without liability insurance will not help you one bit. If your subcontractor cannot pay for the damage or injury, you will have to pay the entire amount and will not be reimbursed or indemnified for it. This will affect your insurance premiums as they rise substantially.
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