What is a Subcontractors Warranty?
When the word 'warranty' appears in an insurance contract, it is a statement of what the insured warrants that he will do. In other words as a condition of the contract the insured is saying that he will perform a certain action. A Subcontractors Warranty is a statement by the insured that he will verify that any subcontractor doing work for him will carry a General Liability policy. Often the policy must be of the same limits as the insured's policy. Further, the subcontractor may be required to name the insured as an Additional Insured on the subcontractor's policy.
At this time virtually every Commercial General Liability policy carries a Subcontractors Warranty. Only a few carriers routinely offer a means to pay for uninsured subcontractors but this still does not provide coverage for the subcontractors work.
The rate charged for subcontracted work takes into account that the subcontractors will be insured independently.
It also makes sense for a contractor to verify that his subcontractors are properly insured and that they name him as additional insured. In addition, written contracts are often recommended and some carriers will not offer insurance unless they are sure that written contracts are used and that they contain an indemnity (also called 'Hold Harmless') clause. This wording should be included in the contract used with subcontractors. Ask your broker where you can obtain contract forms.
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