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FAQs

Q: What's the best way to protect me when a sub-contractor I've hired for a job causes a loss?

There are three steps you can take to protect yourself from the actions of others on your job. The first is to collect certificates of insurance from all sub-contractors. A sample insurance certificate is linked here. This is simply a document that confirms that people working for you have both workers compensation and general liability. Today, most insurance companies will require that you take this very basic step anyway. Certainly the best priced ones require this as a condition of coverage.

The second step is to require that they name you as an Additional Insured (What's this? Click Here). When YOU are named as an additional insured on a sub-contractor's insurance, they will have to defend you from suits that happen because of their actions or negligence. If the sub causes damage on your job, his insurance carries the weight, as it should.

Finally, it makes sense to have a standing contract with all your sub-contractors, as additional protection from claims from others' actions or negligence. Larger contractors do this routinely, but the same principle holds: when engaging in a business relationship, a contract defines who is responsible for what when things go bad. On any job, the when someone messes up, they're expected to fix it. Having a contract in place takes this long-standing custom, and makes it official, for when something really bad happens.

A sub-contractor template contract that you can use for discussion purposes appears here. Always refer to qualified legal counsel before using templates.  Gordon does not practice law and makes no warranties as to the adequacy of this template..

Ultimately, these three steps are the ways to protect yourself if a sub-contractor causes a problem that can't be fixed without great expense.

Q: What are Performance Bonds, and should I have one?

A broad discussion about the basics of contractors' performance bonds is linked at our blog (Click Here). The second part of the question is applicable for any well run contracting operation that is ready to grow their business in by competing in larger projects. What a performance bond says is that you're a player; you're financially solid, and well enough run to handle the job you're bidding on. It's not insurance for you; it's a thorough credit check. If you're really ready to compete in the larger markets, a bond is your ticket to the show.

Q: Do I really need Workers' Compensation?

Massachusetts law requires that all workers are protected by workers compensation. Workers compensation is a social contract, where an employer agrees to pay for medical bills and lost wages if an employee is hurt on the job, and the employee loses the right to sue the employer for these expenses.

A general description of workers compensation appears here.

Where Workers Compensation gets tricky for contractors is when hiring sub-contractors. If a company hires a sole proprietor who does not have workers compensation insurance, that proprietor may cost the hiring company the workers compensation expense (based on the total amount paid to the sub). Thus, the hiring company should either require the sub-contractor to provide workers compensation insurance to avoid this cost, or charge the expense for insuring them on your insurance.

For owners, officers of corporations, partners, and members of LLCs, there are options on coverage and being included in payroll (and charged premium).  A simple breakdown organizing the options for your organization appears here.