One of the best ways to protect your business is to make sure your sub-contractors and 1099 employees are properly insured.
It is crucial that your vendors, 1099s, and subcontractors be properly insured. If they ever accidentally cause damage to a person or property, fail to live up to a client contract, or suffer an injury on the job, their insurance situation could have a serious impact on your business. Ensuring that they carry General Liability , Workers Comp , Commercial Auto , and any other type of insurance you deem necessary, is the best way to protect your business.
After all, if your uninsured sub-contractor makes a costly error or injures someone, you will likely pick up the tab. For example, ABC General Contractor brings in a subcontracted electrician to install some wiring in a remodeled house. This electrician accidentally backs his truck into the house, causing thousands of dollars of property damage. The homeowner sues ABC General Contractor, who discovers too late that the electrician did not carry Commercial Auto coverage. The general contractor will likely foot the bill, and try in vain for years to get repayment from the electrician. Had the G.C. enforced strict insurance requirements on his subcontractors, the insurance company would have likely paid the claim.
Don’t take on the financial risk of having to pay for others’ mistakes! Make sure your subcontractors and 1099s are fully insured. Otherwise they transfer all the risks of running their operation onto your books.
An even more common example: a sub-contracted painter is brought on-board by a general contractor and paid in cash (no written contract, no insurance requirements). The painter’s assistant falls off a ladder and breaks his legs, resulting in $65,000 in medical bills. Since there was no written contract and no Workers Comp insurance in place, the painter’s assistant decides to sue the general contractor for repayment of his medical bills (the G.C. is more likely to have the money to pay than the painter). The general contractor is forced by the court to pay the bills, and fined an additional $100,000 for operating without Workers Comp! Even though the painter’s assistant was not really the G.C.’s employee, the G.C. ended up paying the entire mount, all because the G.C hired an uninsured subcontractor. If the G.C. had required his subcontracted painter to carry Workers Comp, the insurance company would have paid the bills for that employee, and a lwsuit could have been avoided. Instead the G.C. hired the painter “off the books”, and it cost him dearly.
Every subcontractor with even one employee must carry Workers Comp. Any sub with a truck must carry Commercial Auto. And every sub need a General Liability policy. A general contractor who requires his subs to carry these policies can sleep soundly knowing that someone else’s mistake won’t cost the G.C. his whole business.
Our goal is to make sure your business is properly protected, without disrupting business operations in any way. If you have a sub-contractor who doesn’t carry insurance, or you just want to check to see if he/she does, reach out to Mighty Oak. We can help you make sure your subs are properly insured.
