Business

Why Every General Contractor Needs Subcontractor Contracts & Insurance Requirements

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As a general contractor, you’re responsible for everything that happens on your job site — even the mistakes of your subcontractors. That’s why having a written contract and requiring liability insurance isn’t just a formality — it’s essential protection.

General Contractor

📝 Why Use a Subcontractor Contract?

  • Defines the Scope of Work
    Avoid miscommunication and make sure everyone knows their responsibilities.
  • Protects You Legally
    Contracts provide a legal foundation if things go wrong — delays, poor workmanship, or missed deadlines.
  • Clarifies Payment Terms
    Eliminate confusion with clear terms on compensation, timelines, and performance conditions.
  • Sets Quality & Safety Standards
    Ensure every subcontractor meets your expectations and local code requirements.
  • Transfers Risk
    With proper clauses (like indemnification), you reduce your liability exposure.

🛡️ Why Require Subcontractor Liability Insurance?

  • Protects You from Costly Lawsuits
    Covers injuries or property damage caused by your subcontractor’s work.
  • Limits Your Financial Exposure
    Avoid out-of-pocket expenses for claims that aren’t your fault.
  • Meets Legal & Project Requirements
    Most commercial and municipal projects require subs to carry valid coverage.
  • Makes You a Safer Bet
    Show clients and insurers you’re serious about risk management — and potentially lower your premiums.
  • Eases Claims & Disputes
    Insurance provides a reliable avenue for compensation if something goes wrong.

 


 

Here are four real-world claims scenarios where having a contract between a general contractor and a subcontractor makes a major difference in resolving liability and protecting the GC:

🏠 Scenario 1: Plumbing Subcontractor Causes Water Damage

The Situation:
A general contractor (GC) is overseeing the construction of a new custom home. The plumbing subcontractor improperly installs a fitting behind a wall, which later bursts and floods the newly installed hardwood floors, cabinets, and insulation. Total damage: $45,000.

With a Contract in Place:

  • The subcontractor had signed a contract with an indemnification clause and provided proof of general liability insurance.
  • The subcontractor’s insurer covers the damages, and the GC avoids out-of-pocket repair costs.
  • The contract clearly defined the subcontractor’s responsibility for completed work, preventing legal disputes.

Without a Contract:

  • The homeowner holds the GC responsible as the main builder.
  • Without a written agreement or proof of insurance, the GC has no recourse and must either pay for the damages or file a claim under their own builder’s risk or general liability policy — risking higher premiums.

🧱 Scenario 2: Framing Subcontractor’s Worker Injured On-Site

The Situation:
During framing of a new home, a worker employed by a subcontracted framing crew falls from the second floor and suffers serious injuries. The worker sues the GC for unsafe site conditions and lack of fall protection.

With a Contract in Place:

  • The subcontractor’s contract required them to follow OSHA standards and carry both workers’ comp and general liability insurance.
  • The GC tenders the claim to the subcontractor’s insurer under the indemnification provision.
  • Legal defense and damages are handled by the subcontractor’s policy, not the GC’s.

Without a Contract:

  • The GC could be found liable as the site supervisor and general employer.
  • Without a contract or insurance requirements in writing, the GC must handle the defense and damages, potentially costing tens of thousands and putting future projects at risk.

🔌 Scenario 3: Electrical Subcontractor Sparks Fire

The Situation:
A new home is nearly complete. During final walkthroughs, a homeowner notices flickering lights. An investigation reveals faulty wiring by the electrical subcontractor, which later causes an electrical fire. The fire damages the attic and part of the second floor — totaling $80,000 in repairs.

With a Contract in Place:

  • The subcontractor’s agreement includes a clause requiring compliance with the National Electrical Code and mandates liability insurance coverage.
  • The subcontractor’s insurer handles the claim, and the GC avoids delays, legal action, and financial loss.
  • The indemnification clause protects the GC from any liability tied to the subcontractor’s negligent work.

Without a Contract:

  • The GC becomes the primary party responsible in the eyes of the homeowner and their insurer.
  • Without documented insurance requirements or indemnification, the GC is left to cover the costs or engage in costly legal proceedings to recover damages.

🏚️ Scenario 4: Roofing Subcontractor Causes Injury to Neighboring Property

The Situation:
While installing shingles on a two-story home, the roofing subcontractor fails to properly secure their equipment. A bundle of shingles slides off the roof and crashes through the windshield of a parked car on the adjacent property. The homeowner’s neighbor demands full compensation for the $4,500 in damage and files a claim for emotional distress.

With a Contract in Place:

  • The subcontractor’s contract requires proper site safety protocols and lists the GC as an additional insured on their liability policy.
  • The subcontractor’s insurer handles the property damage and any third-party claims.
  • The GC maintains a positive relationship with both the homeowner and neighbor while avoiding direct financial exposure.

Without a Contract:

  • The GC could be held liable for jobsite safety and face direct claims.
  • If the subcontractor lacks coverage or refuses responsibility, the GC’s insurance may need to respond, affecting their loss history and premiums.

 

🧱 Bottom Line:

Don’t leave your business exposed.
Protect yourself with the right contracts and insurance requirements for every subcontractor on your site.

8 Tips To Keep Your Business Afloat While In Lock Down

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It is a challenging time for business owners. Those of us who rely on our loyal customer base to keep our households up and running are either having to adapt to the changing times or floundering and failing, wondering what to do next.

Worrying about losing sales and a loyal customer base are thoughts that weigh heavily on our minds. It is quite easy to get caught in a downward spiral and become overwhelmed with increasing financial obligations, loss of business, and the changing face of business that is now adopting the “new norm” as dictated by society.

How to survive and thrive while in lock down

Those business owners who are meeting challenges head-on and adapting to constantly changing circumstances are the ones who will see their businesses thrive through lock down and beyond. If you want to be one of those to rise to the top, even amidst changing circumstances, follow these simple tips to stay ahead while in lock down:

  1. Think about consulting

If you happen to have a bit more technologically savvy than other business owners, consider becoming a consultant for others. Some will need help with automating systems; others will need help transitioning their business transactions to online activities. Think about offering this aspect of your experience to others, and you may find a profitable “side business” that can grow with the times.

  1. Take on digital marketing projects

Traditional marketing practices may be a thing of the past; we need to look at the here and now, and what options are available to us to ensure that our businesses stay afloat. Learning to digitize our marketing strategy will help your business be more visible to the millions of potential customers who are now online all day. Take the opportunity to embrace change and see what marvelous results await.

  1. What about online teaching?

Surely there are other business owners out there who are so firmly ensconced in brick-and-mortar operations that they don’t see how to survive during this time. Share your expertise and offer short courses to others that can help them move forward as well. It’s a win-win situation for all.

  1. Begin freelancing projects

More than ever, there is a massive call for jobs related to translation, writing, graphic design, marketing, and sales. If you find your business lagging a bit, consider taking up some freelancing projects in your wheelhouse of expertise and making some cash to get you through to the next phase of business development.

  1. Connect to your customers

You might not be having face to face conversations with customers right now, but there are ways that you can connect with potential customers and even attract additional ones by increasing your online presence. You can do this by:

  • Sending out blast emails
  • Increasing your quality content via blogs and social media posts
  • Offering information of value in exchange for email addresses

Stretch your skills, share your stories, and connect with customers in a way you hadn’t previously done before. Customers value authentic, real communication with you, and you’ll inspire their loyalty—and their business–by continuing to communicate with them regularly.

  1. Fancy yourself a “YouTuber”

How about marketing yourself on YouTube? You’ve seen thousands of videos from influencers who are selling products and services via this platform, and they are doing it well! Changing up the way you reach people will inevitably expand your customer base, even in these trying times. You CAN teach old dogs new tricks; upload a few simple how-to videos and see what it can do to bring in business.

  1. Focus on your blog

Quality content sells, especially when it can drive your SEO rankings. Sites like Google, Yahoo, and Bing have a very strategic process of looking for keywords. The more keywords you can provide relative to what people are looking for, the more likely you’ll rise to the top on search engine pages. You’ll want to be on the first page of any search engine, as most customers don’t float past that one as they look for products and services relative to their search. If you have a quality blog, you are not only providing customers with information of value; you are ensuring that you can be found by those looking for your wonderful products! Not too savvy with writing? Hire someone to seamlessly provide blog content, and that will be one aspect of marketing that you can take off your plate.

  1. Take care of your employees

These are uncertain times, and if your employees feel insecure about where they stand with you, they may jump ship. It is now more important and essential than ever to let your employees know that they are valued, heard, and respected. Look for opportunities to give them extra training, opportunities for connection, ways to keep making money even when the future of your business seems uncertain. If you let them know how important they are to your business’s future, they will be more likely to stick with you in hard times.

While no one knows what the future of our economy really looks like, it will be essential to maintain flexibility, adaptability, and a positive attitude in the weeks and months to come. Rise to the challenge, embrace change and growth, and see what marvelous opportunities unfold before you. Best of luck to you in all of your business endeavors!