Subcontractors – The importance of checking insurance

Bona-fide subcontractors are increasingly used by many businesses to provide specialist services to customers and deliver them across a wider geographical area.

A specific insurance condition requiring you to maintain a system of checking bona-fide subcontractor insurances is often precedent. If the condition hasn’t been met, this could result in insurers refusing to provide an indemnity in the event of a claim.

It’s therefore essential to ensure there is a suitable system in place for checking subcontractor’s insurances and identifying key information prior to the subcontractor commencing work. These should be reviewed annually in line with the subcontractor’s insurance renewal to ensure adequate cover on a continuing basis. A record of the check must be kept.

What Do You Need to Check?

It may vary from one policy to another, but typically these require you to obtain evidence that they have policies in place providing indemnity for employers, public and products liability and professional indemnity where professional services are subcontracted. There will be a minimum level of cover required and the policy should provide cover for the work to be undertaken with an indemnity to principals clause.

You will be required to provide the evidence of insurance details with the insurer name and policy number in the event of a claim. This will enable your insurers to redirect a claim to the subcontractor’s insurers where appropriate.

Other Information to Obtain When Assessing Your Subcontractors

A formal approval process is the best way of assessing whether a subcontractor can do the job you need them to do.

A specification for the work will help define the competencies you require of potential contractors which can include:

  • References or examples of previous work
  • Health & Safety policies and procedures
  • Specific qualifications, accreditations & evidence of specialist training.

Content provided by Darwin Clayton, the NAS Preferred Insurance Broker and our Principle Sponsor.