When a contracting or servicing risk hires others to do “Your Work” defined as: “a) Work or operations performed by you or on your behalf; and b) Materials, parts or equipment furnished in connection with such work or operations”, the General Liability Coverage protects the insured contractor from vicarious liability arising out of:
· the torts of the subcontractor;
· the negligent hiring of an incompetent subcontractor; or
· the subcontractor that does not have adequate coverage limits
*This coverage does not replace the subcontractor’s responsibility to obtain their own general liability insurance. Subcontractors are included whether they are determined adequately insured or inadequately insured. Adequately insured contractors are included in a total cost classification and inadequately insured contractors are included in a payroll based classification.
Once determined to be adequately insured: coverage must cover at least six (6) months of the policy period being audited or the date the contractor was paid if known at the time of the audit, the total cost is applied to the applicable Contractors Subcontracted Work classification(s). Total cost is defined in Rule 24.F.:
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The total cost of all work let or sublet in connection with each specific project including: |
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1) The cost of all labor, materials and equipment furnished, used or delivered for use in the execution of the work, however, do not include the cost of finished equipment installed but not furnished by the subcontractor if the subcontractor does no other work on or in connection with such equipment; and 2) All fees, bonuses or commissions made, paid or due. |
*In order for the exclusion of finished equipment installed but not furnished by the subcontractor to apply:
· the equipment installed must be in a finished state – the piece of equipment does not require additional assembly by the subcontractor
· the equipment was not furnished by the subcontractor and;
· the subcontractor performed no other work in connection with the equipment
If it is determined the subcontractor is not adequately insured, they are treated as if they were employees of the insured and assigned to the payroll-based construction classification best describing their operations at a particular job or location. The amount paid to the subcontractor has no bearing as to whether they are chargeable or not. Basis of premium is as follows:
· Payroll received while working on insureds project, if available
· If payroll records are not available and the subcontractor supplied labor and materials and there is a breakdown available in the records, charge labor only otherwise, the total amount paid would be chargeable
· If payroll records are not available and the subcontractor provided labor only, total amount paid would be chargeable
Leased labor is not treated the same as subcontract labor and should be included in the payroll classification based on duties performed. Look for more information on leased labor in a future bulletin.
Stay tuned for our next bulletin: Independent Contractors – Workers Compensation!
