Will Builders Insurance Cover Sub-Contractors I Use?

If you’re a builder hiring sub-contractors, you need a different type of builders insurance. But are sub-contractors already covered on your policy?

If you are insured with OCI, then the answer is most likely yes. If you have builders insurance elsewhere, the answer is most likely no.

Most policies do not automatically include sub-contractors. So, if you regularly use sub-contractors in your daily work, we would highly recommend paying for this extra cover.

In this article, we’ll answer the following questions:

• Are sub-contractors covered by builders insurance?
• What happens when my sub-contractor does his job wrong?
• Can I claim against my sub-contractor if I am sued?

To avoid legal headaches, it’s always worth making sure you have the appropriate cover in place before you start a job. Read on to find out more about hiring sub-contractors while ensuring you have the proper insurance.

Builders insurance and sub-contractors

Working in the building trade presents all sorts of risks. Building sites present significant health and safety risks, with the potential for serious injury or even fatal accidents. Not to mention that disputes with customers are fairly common, with the worst ones ending up in court. Valuable tools, machinery and materials can also be a tempting target for thieves, putting your property and your clients’ at risk.

This is why, no matter if you’re a builder or tradesman or working as a contractor or subcontractor, you should make sure you have the right insurance to protect you and those you’re working for, as well as those you’re working with.

From an insurance point of view, you may have three types of people working for you:

• Employees who work with you permanently or part-time
• ‘Labour-only’ subcontractors, who work under your supervision using your tools and materials
• ‘Bona fide’ subcontractors, who typically make their own decisions and use their own tools and materials

If you have any employees or labour-only subcontractors, you’re legally required to have employers liability insurance. This protects anyone who works for you against accidents, theft, and other workplace risks.

You’ll need to give your insurer a lot of information to make sure everyone’s clear. Your insurer may not agree with your assessment of whether a subcontractor is labour-only or bona fide, so be as clear as you can. In most cases, you’ll need to check that any bona fide subcontractors also have their own public liability insurance.

Contract works insurance

You may want to consider getting insurance to cover any building works while they are in progress. Contract works insurance or contractors’ all risks (CAR) insurance – not to be confused with “car insurance”, just to make things more complicated! – gives you protection if the building works flooded or destroyed by fire. It also covers damage to materials and equipment, including hired-in equipment.

The main part of contractors all risks insurance is the contract works section which provides cover for the property being worked on. This could be a new house build, new shop units, schools or anything else. In insurance terminology, “all risks” means that the policy will cover any loss or damage to the property and/or materials other than certain specific exclusions. Generally speaking, these exclusions can be things to do with the existing structure (if any), errors or omissions in design, penalties, damage to external structures not part of the contract, and defective property.

CAR insurance is important to have if you plan on subcontracting a large or important part of the project to someone else.

An example scenario

Imagine you are building a house. You have neither the time nor the skills to install the bathroom and central heating, so you bring in plumbers. In essence, you are subcontracting the plumbing portion of the project.

Things go perfectly, and the client is happy with the work. However, a few months after your clients move in, their drains start to back up. So, the homeowners contact you – the builder. You investigate the problem and discover the out-pipes do not have enough downward slope to drain away waste.

Relations between you and the homeowner deteriorate, and you cannot work out an amicable solution. This results in the homeowner suing you for repairs.

In this situation, you would notify your insurer. Your insurer would look after the claim, including defending the claim, and then push it on to the subcontractor’s insurance company (i.e. the plumber’s insurance).

This is why it’s vital to have suitable builders insurance – without it, those repairs would come out of your pocket. Hiring sub-contractors comes with many risks, so be sure to give us a call today so we can find the best insurance for you.