Recently I was asked to provide information on the liability insurance needed for subcontractors for a contracting company in Kent.
This often seems to be an area of confusion for companies in the construction industry.
Basically, it depends on whether your subcontractors are labour only subcontractors or bona fide subcontractors.
Labour Only Subcontractors
- Labour only subcontractors work directly under your supervision and use materials, equipment and, possibly, tools that you have provided. They may use their own portable hand tools
- Labour only subcontractors may be employed by you or self-employed
- Because they are working under your direction, they are treated, in law, as employees and so you are legally required to have Employers Liability insurance for them
- Even if you employ labour only subcontractors for a short period of time only, you still need Employers Liability cover
- You should declare all payments made to labour only subcontractors to your insurance broker together with the total number of people working in the business.
Bona Fide Subcontractors
- Often known as supply and fix subcontractors, bona fide subcontractors work without your supervision, are responsible for carrying out their own risk assessments and supply their own materials, equipment and tools.
- They may specialise in different aspects of construction work to you. For example, you might bring in a plumber or an electrician on a shop fitting job. In this case, bona fide sub contractors are not considered to be employees and so you don’t need employers liability insurance for them.
- It is often a condition of your insurance policy, that you check that any bona fide subcontractors have public liability insurance in place, to the same indemnity limit as yours, before you appoint them. It is good practice to ask to see proof of this – either a copy of the policy schedule or a letter from their insurance company, showing cover dates and the indemnity limit – on an annual basis. This will protect you, should they cause damage to property or injure someone whilst working, as your subcontractor, on a job.
- You should also declare to your insurance company how much you pay your bona fide subcontractors annually, so that some contingency public liability cover can be included on your insurance policy to protect you in case a claim occurs, and the subcontractor does not have the appropriate insurance in place. As this is contingency public liability cover only, it costs less than the standard rate.
Disclosure to your insurance broker, of any subcontractors working for you, will ensure that you have the right cover in place and peace of mind in the event of a potential claim.
If you have any questions and concerns about insurance for subcontractors or if you would like a quote on your construction liability insurance, we are happy to help. Give us a call on 01622 620531 or click here to start a quote by email.