17 Aug The Tradesman and The Subcontractor – A Question of Liability

As a small business you may sometimes need to rely on subcontractors to fulfil projects and it’s important to know whether your tradesman insurance covers you in the event of a problem or claim. It’s a bit like using a hard hat – you need to make sure the fit is right to ensure the best protection.

Does your business insurance cover your subcontractor?

Firstly, it’s important to establish whether the person you’re working with is a sub-contractor or an employee. Subcontractors are hired on a temporary basis to provide specific work for a specific project, however, in terms of business insurance and liability the distinction between labour only sub-contractors (LOSCs) and bona-fide subcontractors (BFSCs) is an important one.

LOSCs are hired by and work under the direction of the main contractor on a temporary basis, usually paid by the hour, day or week. They will not have their own liability insurance and are considered employees. The contractor’s business insurance, including employer’s liability insurance, will need to cover these workers and their wages will need to be included on the payroll figures required by the insurer each year.

BFSCs are hired by the main contractor to complete a particular job which they will invoice for as a whole. They will provide their own tools, equipment and materials. Working for themselves, under their own control, BFSCs should have their own business insurance in place. Typically, electricians and plumbers are considered BFSCs

Business insurance and the subcontractors’ clause

As a contractor, your tradesman insurance could have a subcontractors’ clause which means that you must ensure a BFSC has their own business insurance in place; such as employers’ liability, public and products liability, contract workers and/or professional indemnity insurance. And you should check the indemnity limits. The BFSC’s insurer should be well-used to providing ‘evidence of insurance’ letters.

When checking that your subcontractor has their own cover in place, you should take note of the insurance renewal dates. This is especially important when embarking on a longer-term project or an open-ended contract, because if the subcontractors business insurance has not been renewed during the lifetime of the project contract, this could have a serious impact in the event of a claim.

As a subcontractor should you check the contractor’s business insurance?

The first thing to check if you’re concerned about the contractor’s business insurance is the contract. And it’s always best to do this before starting on the project, not when you need to make a claim.

The contract should state exactly what subcontractor insurance you will need, the liability limits required and who is responsible for arranging any other type of business insurance cover.

In almost all cases the contractor will require you, as a BFSC, to have a minimum amount of public liability insurance in place. The standard limit is usually £1,000,000 but many projects have higher limits, including local authority projects which typically require a limit of £10,000,000. So it’s important to check that your policy cover is sufficient.

Master insurance policies may not be sufficient

Even if the main contractor is insuring the project, it is important to check all the risks that are covered by the master insurance policy.

Making sure you are protected as a subcontractor is vitally important if a claim is made against you and, as a BFSC, you may want to ensure sufficient cover for your tools, materials and machinery that may be used and left on site.

Bespoke tradesman insurance is as vital as a hard hat

An ill-fitting, cheap hard hat will do little to protect you in the event of an accident, and the same can be said for business insurance.

Talk to Tredstone Risks today about subcontractor’s insurance, whether you are the main contractor or the subcontractor, and whether you already have insurance in place or need to arrange cover for a new project. We understand that each project is unique and one tradesman insurance product definitely does not fit all.

Get the cover you need with Tredstone.