Why it’s important that your subcontractors have their own insurances before working with you

Using subcontractors as part of your business is a very common occurrence. It is a good business strategy of outsourcing your work without the commitment and overheads of employing staff. However, did you know that although you engage subcontractors, you could be responsible for their actions?

In some instances, a business may be involved in a public liability claim and incur legal and defence costs even if they weren’t directly responsible for the incident.

There are a few scenarios in which a business might be involved in a public liability claim without being directly responsible:

• Vicarious liability: vicarious liability occurs if an incident involves one of your subcontractors the youve engaged as part of your work, job or contract, where your business might be vicariously liable for the actions or negligence of their subcontractors while they were acting within the scope of their contract with you.

• Negligent supervision or inadequate induction processes: if your business has failed to provide adequate training or supervision to your contractors, you might be held partially responsible for the incident. If negligent supervision is proven, your business may be held financially responsible for the damages caused by your subcontractors.

What are the financial implications of being vicariously liable for the actions of my subcontractors?

There could be legal and defence costs incurred to understand and determine the facts of your the incident that has occurred and your level of involvement, and your potential contribution to the compensation claim brought against your company.

How can Public Liability insurance protect my business?

Public liability insurance is an insurance cover that protects businesses and individuals from claims brought against them for actual and alleged negligence to third parties that can result in bodily injury, or property damage.

 Who does Public liability insurance cover?

Public liability insurance will cover the named Insured on the policy. For example, a business could be an insured under the policy, but their employees could also be covered.

Are my subcontractors covered for their negligence under my public liability insurance policy?

If a subcontractor was found negligent and deemed responsible for damages, it is important that they have their own Public liability policy as your policy will not extend to cover their negligence.

Do I need to note subcontractors on my public liability insurance policy?

Ensuring that you disclose the use of subcontractors on your policy is an important part of your insurance cover. The use of subcontractors could increase the perceived risk for the insurance companies. They can also impose higher excess and different policy conditions as a result. Failure to disclose the subcontractors could limit your coverage when you come time to claim.

It is important to review your subcontractors’ insurance coverage before they start working with you to ensure that the insurance coverage policies are adequate to protect your business, and theirs. It is recommended that you site their Certificates of Currency prior to them starting work.

Contact us to discuss your Public Liability Insurance in more detail to ensure you’re adeqduately covered.