Contractors often face tough situations when disputes arise long after a project wraps up. Arguments flare, claims about injuries or property damage pop up, and suddenly, the general contractor finds themselves responsible for work they actually hired someone else to do. This usually happens because the subcontractor agreement wasn’t clear or wasn’t even in writing.
Kelly Booth, a construction underwriting expert at Central Insurance, emphasizes that having a solid subcontractor contract is essential. It’s not just about managing risks. A good agreement spells out who does what, how and when payments happen, and what to do if problems come up. Plus, from an insurance view, it helps contractors push responsibility to the subcontractor and use their insurance if needed.
Many insurance policies only cover what’s written down. Verbal deals? They don’t count. Booth warns that handshake agreements won’t hold up in court. Without a detailed written contract, insurance companies often won’t provide coverage. This leaves the general contractor vulnerable to costly claims.
Booth has seen the difference firsthand. Some contractors had contracts that protected them well, letting their subcontractors’ insurance cover claims. Others who relied on informal deals struggled in court, risking their business and personal assets.
To avoid that, Booth recommends reviewing subcontractor agreements with a lawyer every 12 to 24 months. Laws and standards change, so contracts need to stay up to date. She also points out five key things every subcontractor agreement should cover:
-
Insurance that fits the subcontractor’s work. For example, a small landscaping crew shouldn’t be forced to carry massive insurance limits that don’t match their risks.
-
Insurance carriers should have strong ratings, like an A- or better from AM Best. This ensures the coverage is reliable, even years after a project finishes.
-
The contract must require the general contractor to be listed as an additional insured, meaning they’re protected under the subcontractor’s policy. It should also include terms about waivers of subrogation, notices if coverage is canceled, and coverage that lasts through the legal time limits for claims.
-
Coverage should stay active for the whole period statutes of repose require, which varies by state and project type.
- The agreement should clearly limit or ban subcontractors from hiring others without permission, keeping control over who’s working on the project.
Contracts also need to avoid risky language. If a contract demands things that aren’t legally enforceable, it might be tossed out. For example, forcing a subcontractor to carry insurance beyond what the law allows can make the whole deal invalid—and leave the general contractor on the hook for everything.
Booth suggests paying attention to warning signs when making agreements. If a subcontractor hesitates to share their insurance details, refuses legal review of contracts, has a poor job or safety record, lacks solid workers’ compensation history, or leans too much on unknown subcontractors, it’s a red flag.
It’s also important to know that a Certificate of Insurance (COI) shows only a summary of coverage. It doesn’t tell the full story. Some states, like Georgia, now require policies to be attached to COIs to prevent fraud.
Central Insurance stands out by helping contractors with these details. Their construction team helps spot gaps in contracts, improve safety and paperwork, and align insurance coverage to better shield businesses before problems start. With strong support and experienced claims staff, they assist contractors when things go wrong.
For contractors, a detailed subcontractor agreement is more than paperwork—it’s a key part of protecting their work and business. The right contract and insurance coverage can save money, time, and stress down the line.