As the contractor on a construction project, you face a multitude of serious risks. When you start bringing subcontractors into the project, those risks go up exponentially. Suddenly you could be exposed to liabilities for damages or injuries caused by those subcontractors working on your behalf, whether it’s an injury to one of the sub’s employees, an injury to a site visitor, or some type of property damage.
A recent case involving one of our insureds illustrates these risks.
A Workers’ Compensation claim was filed with the Department of Labor involving a worker who suffered a very serious injury. We denied the claim as our investigation revealed the injured worker was not an employee of the General Contractor (our insured) but of the subcontractor.
Further investigation into the compensability issue was conducted and we found the subcontractor did not have the required insurance. By statute, Workers’ Compensation insurance is required in the State of Hawaii.
According to the report, the injured worker was at the job site and injured after falling off scaffolding while under the direction and control of the subcontractor. The extent of his injuries surpassed $950,000. The insured stated they did not confirm whether the subcontractor carried the required insurance.
A hearing was held at the Department of Labor to defend our position to deny this claim. A decision was issued finding the claim compensible against our insured because the subcontractor hired by our insured was uninsured.
To transfer risks appropriately, make sure you are following some best practices:
• Require a written contract;
• Request certificates of insurance with additional insured status; and
• Specify minimum insurance requirements.
Learn more about risk transfer here.