Many Australian industries rely on subcontractors as employees who perform regular duties. In particular, the construction and trade industries deal with high-volume projects that require a large number of employees, so an efficient way to complete their jobs is with subcontractors. 

As a head contractor, you’ll be in charge of navigating the insurance policy and ensuring that your business is protected. A common misconception is that public liability policies cover everyone on the construction site; however, this doesn’t extend to subcontractors.

Your insurance policies will generally cover your errors and your employees’ errors, but subcontractors fall into another bracket. How does this work? Morgan Insurance Brokers, as your experts, will break it down for you.

The Difference Between Employees Vs Subcontractors:

When it comes to insurance policies, terms and conditions are very specific. That’s why it’s important that you understand your coverage and ensure that you’re prepared in the event of a claim. So, what is the difference between an employee and a subcontractor?

• Employee: Employees are protected under your policies because they are a part of your company and business. 
• Subcontractor: Subcontractors are under separate business entities with their own ABNs, which means they are liable for their own work and not covered under your insurance policies.

So, subcontractors are an efficient way to manage workload in high-volume and demanding industries, but they come at a risk, as you’re not protected for their work. Insurers will often ask for the percentage amount of your turnover that is paid to subcontractors, so they can calculate your risk.

Am I Liable For Subcontractors’ Errors?

If a subcontractor causes damage or makes a mistake, they should be directly liable (i.e. through their own insurance). Your insurance policy will view this as third-party negligence, meaning you’re not directly liable.

However, if a subcontractor doesn’t have insurance and they’re being sued, this may fall on you, as you have the insurance (and finance) to cover it.

How Do I Ensure That I’m Protected From My Subcontractors?

Even if you or your employees aren’t directly liable for the damage caused by a subcontractor, you can be held ‘vicariously liable’ for their actions. So, your policy needs to extend and cover this specific exposure with Vicarious Liability coverage.

Subcontractors can also sue you for negligence if they are injured on your site, which is generally excluded from insurance policies, too. To protect you from this, your insurance policy should include ‘Worker-to-Worker’ coverage, which extends to any claims that come from subcontractors in your business. 

Our Advice 

So, as a head contractor, it is your responsibility to ensure that your business is protected. This starts with the insurance policy. But what do you look for? Let’s break it down.

• Disclosure: You should disclose that your business uses subcontractors to your insurer; otherwise, claims could be denied.
• Certificate of Currency: It is important that, before you allow a subcontractor to begin work on your site, you check that they have a current certificate of currency for public liability. This means they have the appropriate insurance to protect their own work.
• Written Agreement: You should have an agreement in place that explicitly states they own insurance and you are not liable. 
• Compliance: It is down to you to ensure compliance is upheld. For example, if a subcontractor tells you they are renewing their insurance ‘next week’, you should wait until they have obtained it to let them on your site. 

The truth is, when it comes to insurance policies, there is a lot to look for, and it can be easy to miss vital information. With Morgan Insurance by your side, you don’t need to worry about whether you’ve covered all the bases. We’ll navigate the insurance market for you to secure the best terms for your insurance policy. We’re experts, so you don’t have to be. 

Morgan Insurance: From Start To Finish

As your insurance broker, we’ll be with you every step of the way. We’ll get you set up with a policy that works for you when you need it most. 

The best part? We make it easy to get started with us. Reach out today. A member of our team will take it from here, so your insurance isn’t something you need to worry about ever again.