Why do I need Contractors Liability Insurance?
In most instances, you’ll need your insurance cover note to get onto the site in the first place, so having that ‘piece of paper’ is important because without it, you may not be able to do the job for which you intend to get paid.
Beyond that, though, there are other important considerations. You are also responsible for the safety and workmanship of all staff or subcontractors you employ, irrespective of whether they have their own insurance in place. You are also responsible for the safety and workmanship of all staff or subcontractors you ask to carry out work, and the tangle of legislation you face on this can be overwhelming. Breaches can put you out of business without the right insurance cover.
When taking on valuable commercial work, you are also exposing yourself to claims for damage, injury and loss of income at their client’s premises, and these claims can be disastrous. It’s not just the obvious mistakes that can cause a problem; it’s failing to do something you should have done, failure of the equipment you supply; or that the work you do simply falls short of your customers expectations. You may not have done anything wrong at all, but while its being set right, you need to protect yourself and your assets.
What is the Difference Between Labour Only and Bona Fide Sub-Contractors?
Labour Only Sub-contractors
- 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.
- Because they are working under your direction, they are treated, in law, as employees and so you are required to have employer’s 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 also remember to include labour only subcontractors under your public liability insurance. For this, you may need to provide an annual wages figure or the maximum number of people working in the business at any one time.
Bona Fide Sub-contractors
- Subcontractors who work without your supervision and bring their own materials, equipment and tools are known as bona fide subcontractors.
- 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 employer’s 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 in case a claim occurs, and, for whatever reason, the subcontractor does not have the appropriate insurance in place. As this is contingency public liability cover only, it costs much less than the standard rate.