Do you know if they are properly insured?
Using subcontractors is common practice – an often necessary to get certain parts of the job done. If you hire subcontractors to do work for your affiliate they need to provide you with a copy of their Certificate of General Liability Insurance naming your affiliate as an additional insured on their policy before they step foot on your jobsite. By requiring the certificate – which shows limits and dates of coverage – you have proof that they have proper liability insurance in place. And by asking that your affiliate be named as an insured on their policy you are protecting yourself for any incident which may arise out of their work.
In addition to GL coverage, your subcontractors should also give you a copy of their Certificate of Workers Compensation Insurance. This shows that they have adequate coverage for themselves and their employees. If the contractor, or one their employees is injured while working on your jobsite, the injury would be covered by the contractor’s Work Comp insurance. If the contractor does not have Work Comp insurance, your affiliate could become liable, which is something we want to avoid.
Additionally, if your subcontractors do not have their own Workers’ Compensation coverage, the exposure of the contractors’ employees will be place on your Workers Compensation policy as uninsured subcontractors when your policy is audited, and you will be charged a premium for their payroll.
During a Workers Compensation audit, it is common for affiliates to report uninsured, drywall subcontractors. Uninsured drywallers come at a cost of $9-$27 per $100 of payroll, depending upon your state. For example, if a drywaller without Workers Compensation insurance performs $2,000 worth of work for you, that work would be picked up under your audit at a cost of 20 x $9 – $27; an additional cost to your affiliate of $180 – $540.
As well as the additional premium due, uninsured subcontractors can have a significant impact on your loss history and Work Comp rates in the future. Many states have deemed that the general contractor is responsible for the losses of any injured employee of an uninsured subcontractor. Therefore, if a subcontractor’s employee is injured on the job and the employer does not carry Work Compensation insurance, the medical bills and lost time wages could be picked up on the affiliate Work Comp policy. Prior losses such as this have a direct impact on your insurance rates, and will result in higher Work Comp premiums.
In multiple states, sole proprietors may elect whether or not to be covered under workers compensation regulations, and could potentially become an “uninsured” subcontractor.
Only a few states have the option for a sole proprietor to be “exempt” from workers compensation coverage. Arkansas, Arizona, Colorado, Florida, Indiana, Kentucky, Maryland, Michigan, Oklahoma, Tennessee and Texas allow for such exemptions. To be classified as “exempt”, each state has a specific form that must be completed, signed and filed by the sole proprietor before they begin working for your affiliate, and they cannot have any employees.
If your affiliate does not have a copy of this filed exemption form or proof of workers compensation coverage to provide to the auditor for the period the subcontractor performed their services, the carrier will assess a premium based upon the payroll/contract price for the “uninsured” subcontractors.
In order to protect your affiliate and avoid hassles, you should require any subcontractors that you hire have the proper insurance coverages in place, and that you have a certificate of insurance as proof before they begin work.
If you have any questions about this information please call the Habitat for Humanity Affiliate Insurance Program at (888) 553-9002.