Avoiding Delays, Disputes and Damage

Note to contractors and subs: Get more eyes to review subcontracting agreements

Everything from lien rights to project expectations are included in contracts for your jobs. But all you need is a faulty or incomplete insurance document to end up buried under the weight of a collapsing project. Having your subcontractor agreement reviewed by an insurance professional is a means to mitigate the chance of a liability setback.

A subcontractor agreement sets out the terms and conditions between a contractor and a subcontractor for the provision of services, including such elements as:

• Client’s identity
• Details about subcontractor
• Scope of responsibility of the subcontractor
• Indemnity possibility by subcontractor
• Agreed upon limit of liability

More insurance carriers are adopting language on policies that makes sure you have proper avenues to collect against a subcontractors’ insurance if there is a case of bodily injury or property damage on the job, says Mike Fusco of Fusco & Orsini Insurance Services. For added security, you can obtain a subcontractor warranty endorsement from Fusco’s agency.

“If you’re a general contractor or a subcontractor and you don’t have a proper subagreement in place, we can send one to you,” he says. “You can send it to your attorney to make sure there’s nothing they want to add, and we’re happy to send it to your insurance company to make sure that they approve of it, so we know that if a loss were to occur you’re not going to have any issues because of your subagreement.”

An additional advantage to a general liability company asking for this information up front is that the underwriter will scrutinize it and tell the company if the language is acceptable or not.

“It offers another set of eyes on the document to make sure we have everything is in order,” Fusco adds.

An article in the Lumber/Building Materials Journal agrees that general contractors need a comprehensive subcontractor agreement in place.

For maximum coverage, the article suggests looking for such clauses as:

• Scope of work
• Review of plans and site conditions
• Payment terms
• Change orders
• Termination for convenience
• List of sub vendors
• Correction of work/warranty
• OSHA compliance
• Liquidated damages
• Dispute resolution

The time to nail down the details of your contract is not after an unforeseen injury or property damage occurs – it’s before the job begins.

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