Who Is Responsible for Subcontractors’ Work?

May 13, 2024
Engineer working on outdoor project and talking on phone

Subcontractors are responsible for their own work, including paying for the damages and resulting legal costs associated with third-party claims made against them. However, what happens when they don’t have insurance coverage in place to protect them from (likely) claims? And, in the case of no coverage, what happens when they can’t pay for damages out of pocket? Who is held responsible?

In this blog, we’re discussing subcontractor liability, how insurance coverage protects both subcontractors and those who employ them, and what businesses can do to reduce risk related to subcontractors’ work.

Who Is Responsible for Subcontractor Mistakes?

When a general or prime contractor hires a subcontractor to do specialized work for them, they typically bear some responsibility for the work done. The degree of control that the general contractor has over the subcontractor’s work is an important factor in determining liability. For example, if the general contractor closely supervises and directs the subcontractor’s work, they’ll be more likely to be held liable for the subcontractor’s mistakes or negligence. 

An important aspect of a general contractor’s job is to hold subcontractors accountable for fulfilling their contractual obligations, including meeting project expectations, complying with industry-wide regulations, and adhering to safety standards. The prime contractor is accountable to the project owner for the project’s completion, which obviously includes the work done by subcontractors.

Ultimately, subcontractors are responsible for their own mistakes, holding what’s called direct liability. However, a prime contractor may be held vicariously liable for the subcontractor’s work if it results in third-party claims, such as when the subcontractor does not have adequate coverage for said claims. The contractor may need to defend against such claims or seek indemnification from the subcontractor to get repayment.

Who is Responsible if a Contractor Hires a Subcontractor?

Let’s dive deeper into the contractual relationship between contractors and subcontractors. When hiring subcontractors, prime contractors will establish a contract that outlines the details of their working agreement. This agreement will outline the subcontractor’s scope of work, the project’s quality standards, and relevant timelines and compliance requirements. 

Because the contractor hired the subcontractor, they are in part responsible for the work that the subcontractor does. However, the legal implications of hiring subcontractors depend on the contractual provisions, which will determine if they have more or less liability over a subcontractor.

Prime contractors should ensure their subcontractors’ compliance by setting clear project standards within a contract, as well as by requiring proof of insurance coverage to guarantee their protection and ability to pay for damages if claims arise.

Who Is Responsible for Monitoring the Subcontractors?

General contractors must be diligent in their oversight responsibilities throughout a job. Different mechanisms exist for ensuring subcontractor performance, such as purchasing subcontractor default insurance or requiring subcontractors to get performance bonds to guarantee they’ll complete their work. 

The impact of inadequate supervision on project success and legal liability cannot be understated. First, contractors should require all hired subcontractors to carry appropriate insurance coverage, usually including general liability and workers’ compensation insurance. You’ll want to verify all incoming hires’ insurance certificates, or COIs, and consider asking for subcontractors to list your business as an additional insured on their policy if possible.

Additionally, contractors should conduct regular inspections of subcontractors’ work, monitoring it to ensure it meets all project specifications and standards. Without the diligence of proper Construction Insurance risk management the likelihood of claims increases. 

Who is Generally Responsible for Determining a Subcontractor’s Responsibility?

Another important role of general contractors is to select subcontractors for hire after assessing their ability to fulfill contractual obligations and do high-quality construction work. The general contractor will play a major role in the subcontractor hiring process from beginning to end, including selection, contract-forming, risk management, and oversight throughout. 

Some criteria for selecting subcontractors and assessing the level of responsibility they can take on include:

  • Years of experience
  • Track record of previous successful projects
  • Relevant certification and licenses
  • Insurance coverage proved through certificates of insurance (COIs)
  • Technical skills and unique skill sets

Contracts established between general contractors and their hired subcontractors will be the legal frameworks supporting contractor decisions and outlining expectations. Other regulations to consider here will include relevant labor and employment laws depending on the state the contracting is happening in, as well as industry-wide certification standards that contractors must meet. 

Reduce Subcontractor Risk with a Focus on Risk Management

Proper risk management, such as obtaining subcontractor default insurance or performance bonds, can help mitigate legal risks associated with hiring subcontractors. Additionally, ensuring that all hired subcontractors have proper insurance in place to cover highly likely claims, such as general liability and workers’ compensation insurance, will not only help you maintain compliance but also avoid the likelihood of litigation. Learn more about how you can protect your business and hire subcontractors by giving us a call today.

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