Am I liable for the work of my subcontractors?

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If you’re a business who works closely with subcontractors, the lines can often be blurred when it comes to acquiring the best insurance for your business. Most of the time, when businesses use sub-contractors it’s more of a business to business agreement, meaning that the sub-contractor will most likely have their own insurance cover for when a claim is made. But what if something goes wrong – who is to blame? Are you as a business liable for the work of your subcontractors? This guide will go into the finer details surrounding this age old question and help you decide if you need comprehensive subcontractor insurance from Tradesman Saver.

What is a subcontractor?

When it comes to finding adequate insurance for your business it helps to know where you stand on the legal definitions of what a subcontractor actually is. A subcontractor is hired by a parent business to complete a task or project while remaining an external separate entity to the parent business. For example, if we were to look within the construction industry, you’ll find the use of subcontractors to be a common feature of any construction site. You’ll have the main foreman of the sites who oversees the operation of the project with many subcontractors such as builders, excavators, bricklayers etc who work within the site on a sub-contractual basis.

Subcontractors are not considered permanent employees of the business that hires them as their work is normally agreed on a temporary basis for a short-term period. Labour-only Subcontractors (LOSC), work under the direction of the main contractor and will not have their own insurance and so will be deemed employees. Bona-Fide Subcontractors (BFSC) supply their own materials and work under their own control and possess their own insurance.  Examples of BFSCs are electricians and plumbers who are hired by the main contractor to complete a particular job.

Although sub-contractors can seem like a grey area in the business insurance world, it’s quite simple to understand if you look at contractors and sub-contractors as two separate entities or businesses, each requiring their own personal and third party insurance cover. But who is liable if something goes wrong?

Am I liable for the work of my subcontractors?

While you don’t need to purchase insurance cover for everyone of your subcontractors you do need to ensure that each of your subcontractors has valid insurance of their own. There are generally two options when it comes to the insurance cover between contractors and subcontractors. The first is that you require each of your sub-contractors to possess their own insurance cover such as employers liability insurance or public liability insurance. The second option is delivered by adding each sub-contractor to your current general insurance policy. Tradesman Saver offer competitive rates and premiums when it comes to your public liability insurance and contractors liability insurance policies, but it’s generally more cost-effective for contractors to go with the first option and ensure that their sub-contractors are fully qualified and insured as party of the terms of agreement.

It’s not uncommon for contractors to ask to see your certificate of liability insurance as a precautionary contractual agreement, so don’t be put off if someone asks you to present your certification. If you’re wondering how to add sub-contractors onto your current insurance policy or you’re a subcontractor looking to purchase your first liability insurance, visit the free-to-use tool on our website to find the right level of cover.

What types of insurance should I look into for my business?

There are several different types of business insurance available at Tradesman Saver that you could look into purchasing. Some of them are compulsory by law in the UK, while others are optional. Employers’ liability insurance is a legal requirement in the UK for business owners who have employees. Employers’ liability insurance will cover you against any compensation packages, legal fees, sick pay or medical bills that occur on the back of a claim made against your business by one of your employees. Failure to posses this form of business insurance can mean you’re forced to pay up to £2500 in fines for each day you’re without this compulsory form of insurance.

The second insurance policy your business should definitely look into is public liability insurance. Although not compulsory within the UK it’s vital that your business possesses this insurance to cover yourself against third party claims made against you. Public liability insurance will cover you against any third party claims made against you by employees of other companies or members of the general public. This will generally cover any medical bills and transportation costs, legal fees, as well as any compensation packages that are granted to the third party in question. Although not compulsory, the expense in the short-term is not a large price to pay for the cover you can expect to receive in the long-term.

Why do people hire subcontractors?

For a long time. businesses have made the most of subcontractors to provide a cost-effective service for short-term projects. Sub-contractors are most commonly used within the construction industry, especially on building sites where a lot of different specialities and trade skills are required across one project. Rather than hiring individual bricklayers, plumbers, electricians etc within one business, businesses hire the services of these trades on a sub-contractual basis as and when they are needed. This short-term contract provides a cost-effective service for both parties while also allowing both parties to operate in a fashion that abides by both parties insurance policies.

In conclusion

Hopefully by now you’ve gained a solid understanding of whether or not your business is liable for the work that your subcontractors complete. The answer is two-pronged. You can either add each subcontractor to your current liability insurance policy or you can ensure that every subcontractor you use already possesses an adequate insurance policy of their own. And, at the end of the day, the liability rests where the fault lies, unless you have policy agreements already in place. Most businesses often opt for the latter. There are a wide selection of insurance policies available at Tradesman Saver to suit a variety of trade and self-employed roles. See what we can do for you, today.

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*This indicative price is for £1m public and products liability, £250,000 legal expenses, £10,000 financial loss and £10,000 accidental death insurance cover for a sole trader. The price includes insurance premium tax and our admin charge. 22% of new customers paid less than £58 between 1st January 2019 and 31st August 2019. The actual price you pay will depend upon your specific business requirements and will be affected by your trade, your claims history and the optional covers you select which are all priced separately during the quote process. This website is intended for customers based in the UK and is therefore subject to the UK regulatory regime(s) © Copyright 2019 Tradesman Saver | Tradesman Saver and Henry Seymour & Co. are trading names of Barkdene Limited which is authorised and regulated by the Financial Conduct Authority (FRN 303965) for our insurance distribution and credit broking activities. Barkdene Limited is a credit broker not a lender. You can check this on the Financial Services register https://register.fca.org.uk/.
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