Are your subcontractors covered on your insurance?

Subcontractors are a brilliant way to get work done on your behalf, but insurance risk is there.

There is a common misconception that there is no risk to you when you subcontract activities out, but that is simply just not the case.

A subcontractor is an independent third party who provides a service on your behalf.  Subcontractors generally specialise in one particular service, and you may engage several different subcontractors to help get a job done.  

As the subcontractor is completing this work for your customers, on your behalf, you could be held liable for that work. 

If there is third-party injury or property damage caused by a subcontractor, you will generally be the one who receives a demand from the third party. Your liability insurer will seek to recover any damages paid from the subcontractor’s insurer for the subcontractor’s liability.

You should obtain proof from all your subcontractors of their own liability insurance cover, not just when you first engage them but every year that their policy is renewed. If a subcontractor does not have their own insurance this can put you (and your insurer) in a difficult position. Your insurer may have to pay the claim and then seek to recover from the subcontractor, with no guarantee of success.

You are also potentially liable for injuries sustained by a subcontractor in the performance of their work for you. The subcontractor will likely have its own worker’s compensation policy. If they do, the subcontractor’s workers compensation insurer will finalise the worker’s comp claim and then might seek recovery from your liability insurer you are deemed to have contributed to the injury.  This is typically known as a Worker to Worker claim, they can take years to become known and can be very expensive. Hence worker to worker claims nearly always have much higher excess. 

Subcontractors can help a business to expand and specialise, but it’s important we all do not forget the associated risks.

Note: this article contains general advice only & you should seek further information from your personal Rivers Insurance Broker about the impact of any information provided here on your personal or business needs. ABN: 28 010 242 681 AFS License: 247093 www.riversinsurance.com.au