Subcontractors and certificates of insurance

Why this matters

In many states, if a subcontractor does not carry workers' comp and one of their workers is hurt, the general contractor can be treated as that worker's employer. The general contractor's insurer then pays the claim and charges premium for the subcontractor's payroll. Massachusetts, for example, says general contractors can be held liable for claims by a subcontractor or its employees.

Collect a certificate before work starts

A certificate of insurance is a one-page summary of a policy. Ask every subcontractor for one before they start, and ask for a new one when their policy renews. Check that:

• The business name matches your contract.
• Workers' comp is listed, not just general liability.
• The policy dates cover the whole job.
• The policy lists the state where the work happens.

Verify, do not just file

A certificate shows only that a policy existed when it was printed. Policies can be canceled. Many states have free coverage lookup tools. Washington's Verify a Contractor tool, for example, shows a contractor's registration and insurance status. You can also ask the subcontractor's insurer to tell you if the policy is canceled.

Every state guide on this site has a "Check a contractor's coverage" section that links to that state's official lookup, when one exists.

How to ask for a certificate

Ask the subcontractor to have their insurance agent send the certificate to you directly. A certificate that comes from the agent is harder to fake than a copy the subcontractor forwards. You can copy and adapt this request:

• Subject: Certificate of insurance needed before work starts.
• Please have your insurance agent email us a current certificate of insurance before your crew starts work.
• It should show workers' compensation and employer's liability coverage, the policy number, the insurer, and the policy dates.
• It should list the state where the job is located and name our business as the certificate holder.
• Please also ask your agent to tell us if the policy is canceled or not renewed.

Know your state's rules

Some states set specific conditions. Washington lists six conditions a contractor must meet to avoid owing a subcontractor's unpaid premiums, including that the subcontractor has an account in good standing and keeps its own books. New York presumes construction workers are employees of the contractor unless strict tests are met. Florida requires construction businesses to carry coverage with just one employee.

Use written contracts

Your contract should require the subcontractor to carry workers' comp for its workers, to give you current proof of coverage, and to tell you if coverage ends. In some states you can deduct the cost of covering an uninsured subcontractor only if your contract says so.

Watch for warning signs

Be careful with subcontractors who want to be paid in cash, do not send written invoices, will not give you a certificate, or say their workers are all contractors too. Uninsured subcontractor payroll is one of the most common causes of surprise audit bills.