| Every business hires an
independent contractor or subcontractor from time to time. When this arrangement becomes a
significant part of your operation (a service making deliveries for you) or involves a
significant construction or renovation project, you need to take special precautions. UNINSURED CONTRACTOR OR
SUBCONTRACTOR
Your insurance company will assume that any
contractor that you hire without a certificate of insurance is an uninsured contractor. An
uninsured contractor is really no different than an employee.
If an uninsured contractor or his/her employee is injured
while working for you, they have the option of seeking workers compensation benefits from
YOUR policy. Because of this possibility, your insurance company has the right to charge
you a premium for this exposure. What you paid this uninsured contractor can be considered
100% payroll, even though only a portion may be actual payroll, and added to your workers
compensation audit. The rates for carpenters, plumbers, electricians, computer
technicians, drivers, etc. can vary greatly from what your operation currently pays.
NOTE: Uninsured contractors can also impact your
general and auto liability policies. |
INDEPENDENT CONTRACTOR You should insist that ALL your independent contractors provide you
with a certificate of insurance (workers compensation, general liability, and/or auto
liability) depending on the type of services being provided. You should also be named as
"additional insured" under the contractors policy.
SUBCONTRACTOR
A subcontractor should be treated no different than an
independent contractor. As a matter of fact, if your independent contractor hires a sub to
perform some of the work, you need to secure a certificate from the sub as well.
MAINTAIN CERTIFICATE FILE
As you gather certificates, you need to review each for
completeness and accuracy. The insurance in force needs to cover the period of time the
work is being completed. This may require you to demand additional certificates as
policies expire and renew.
CONTRACTS AND AGREEMENTS
While these should be prepared by your attorney for your
specific needs, we have some sample generic forms that you can review. In addition, we can
help you establish insurance requirements and limits. |
