While it’s true that general liability policies protect a business from most of the financial liability when a client or third party experiences a financial loss due to problems with workmanship, it’s not a universal truth. There are a lot of situations where a general policy needs additional support in the forms of extended professional liability protection, additional public liability, or a variety of other add-on policies. When your business relies on subcontractors for a lot of the work done, the relationship between your business and the subcontractor also changes the balance of liability in situations where it’s the subcontractor’s work that is at the root of the problem. That’s why subcontractors need their own professional liability insurance.
Contractor and Subcontractor Policies
Sometimes a contractor’s policy does include subcontractors, up to the policy maximum. In those cases, subcontractor insurance provides additional protection for the subcontractor in the event that the contractor’s policy hits a maximum or finds an exclusion to the policy’s coverage. Quite often, contractor E&O policies exclude subcontractors, and then the subcontractor’s insurance is the only safety net offered to the subcontractor against financial liability for those damages. Contractors and subcontractors should coordinate coverage to make sure both are fully protected in the event of an issue, because often liability is shared and not solely assigned to one or the other when a claim arises.