Subcontractor General Liability Insurance

May 20, 2024
Owner of home shaking hands after architect build home finish.Architect or civil engineer concept.

Working with subcontractors is very common in the construction industry. It allows businesses access to talented individuals with specialized skills for the many tasks that can come up on a building project. However, this flexible collaboration style is increasingly common in construction and other industries, but it is not without risk. 

To create strong working relationships, the general contractor or hiring business and the subcontractors or independent contractors must understand the importance of insurance coverage. Ultimately, businesses and subcontractors should work together to ensure adequate coverage for all parties involved. 

Follow along as we discuss subcontractors and how policies like general liability insurance are designed to protect them.

What Is a Subcontractor in Insurance?

In insurance, a subcontractor is an independent party hired for specific duties within a construction project. They are expected to purchase and hold their own insurance coverage to protect themselves against potential risks that could arise on the job due to their work. This is as opposed to regular company staff, who will be covered by their employer’s policies. Here is more about Construction Insurance Risk Management.

Additionally, some clients, general contractors, or other hiring parties can include specific contractual obligations or insurance requirements for subcontractors to enforce company-wide standards or help maintain compliance with larger regulations. 

What Does General Liability Insurance for Contractors Mean?

A CGL policy, meaning commercial general liability insurance, is an important kind of coverage to understand. A general contractor typically purchases CGL policies or client hiring subcontractors to work under them. Subcontractors and independent contractors should purchase their liability policy and consider other coverage needs.

Key coverages for general liability insurance for contractors include:

  • Bodily injury or claims for injuries to third parties (medical expenses, lost wages, etc.)
  • Property damage or claims for damages to third-party property 
  • Personal and advertising injury or claims like defamation, libel, slander, invasion of privacy, false advertising, or copyright infringement
  • Legal defense costs associated with facing a lawsuit about a covered claim

Key exclusions for general liability insurance for contractors include:

  • Poor workmanship (instead covered by protective liability)
  • Professional services (instead covered by professional liability)
  • Illegal activities or intentional acts of harm 

Does a CGL Policy Cover Subcontractors?

Subcontractors are usually required to carry certain insurance coverage to protect themselves, their general contractor, and relevant project owners and stakeholders from risks associated with their work. 

A CGL policy will not cover subcontractors unless the general contractor or other policyholder chooses to extend coverage to them via an additional insured endorsement, which would grant liability protection to all named subcontractors. 

Generally, subcontractors and independent contractors will need their own CGL insurance to safeguard themselves against claims related to their work. Therefore, subcontractors will take on their own general liability insurance cost, paying their insurance provider monthly premiums.

Is Contractors’ Protective Liability the Same as General Liability?

Another kind of insurance that protects contractors’ work is contractors’ protective liability or CPL insurance. CPL insurance protects contractors against claims arising from negligent work by hired subcontractors. 

While general liability insurance provides broad coverage for a contractor’s work, protecting from high-possibility claims related to bodily injury, personal injury, or property damage, CPL insurance is designed to protect contractors from risks posed by subcontractors.

When working with subcontractors, contractors should add this layer of protection, as their or their subcontractors’ CGL policies will not provide coverage for negligence. 

Understanding General Liability for Contractors and Subcontractors

In conclusion, general liability insurance provides policyholders broad coverage for claims such as bodily injury, property damage, personal injury, and legal defense costs related to third-party claims. Subcontractors usually need their own CGL insurance unless their general contractor or project owner extends coverage to them via an additional insured endorsement. Other policies, such as contractors’ protective liability (CPL) insurance, which protects contractors from claims arising from subcontractors’ negligence, offer an extra layer of protection not covered by general liability policies. 

Ensure your subcontractors are as covered as they need to be — to protect them and you from suffering the consequences of unplanned liabilities. Reach out today to learn more about how our expert team helps clients nationwide maintain compliance and avoid out-of-pocket claims.

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