Paper contractors often think they’re safe from the usual risks on construction sites because they don’t handle tools or do the physical work. But even when all the tasks are subcontracted, these contractors can still face serious liability if things go wrong. Tanner Webb, a construction underwriter with Central Insurance, has seen five common insurance mistakes paper contractors make. Knowing these can help protect businesses from big problems.
One major mistake is relying too much on contracts to keep liability away. While contracts do offer some protection, they can’t do it all. Some contracts miss key phrases that make agreements enforceable, like “to the fullest extent permitted by law.” Others forget to include crucial insurance details, such as naming the general contractor as an additional insured or ensuring coverage continues after the project ends. Without these, a paper contractor could lose important coverage and end up paying for claims.
Safety is another critical area that some paper contractors overlook. Just because they’re not doing the hands-on work doesn’t mean they aren’t responsible for keeping the jobsite safe. Accidents can happen if a site isn’t properly lit, fenced off, or if equipment isn’t secured. Webb shared an example where a pedestrian was hurt after entering an unfenced site at night. The paper contractor was held liable, showing that safety can’t be ignored.
Many paper contractors also miss out on insurance coverages that cover mistakes and pollution risks. Professional liability insurance is important because it covers errors like poor project coordination or communication—even if the contractor didn’t perform the work themselves. Pollution liability insurance is less common but just as important, covering cleanup and damages if construction causes issues like runoff or fuel leaks. One case involved a contractor who didn’t use silt fencing, causing sediment to pollute a nearby waterway after heavy rain.
Another pitfall is underestimating how much claims cost, even if a paper contractor isn’t at fault. Contracts don’t always keep a contractor out of lawsuits. Legal defense can get expensive quickly, and contractors can be dragged to court just for being involved in a project.
Lastly, some paper contractors still rely on verbal agreements or handshake deals. These may seem easier, especially for small jobs or quick starts, but they don’t offer the legal protection that written contracts do. An example showed how a verbal deal led to a huge liability claim after a subcontractor caused a fire because of faulty work. Without a written contract, the general contractor had to cover the damage.
To stay protected, Webb advises always having written contracts with clear indemnification and insurance clauses. Paper contractors should ensure subcontractors add them as additional insureds and maintain coverage throughout the statute of repose period. It’s also smart to carry professional and pollution liability insurance and to keep up with jobsite safety measures.
Central Insurance emphasizes how important it is for paper contractors to understand their risks and get the right coverage. Their team of experts works with contractors to build better policies that cover the real dangers of subcontracted work. For paper contractors, being cautious, clear, and covered is the best way to avoid costly surprises.