April 19, 2019

Protecting Your Business Through Sub-Contract Agreements

Whether you are a general contractor subbing out all of your jobs or a small contractor who only uses sub-contractors occasionally, it is essential that you are using the right sub-contract agreement to protect your business. With a booming economy and becoming harder to find good employees, it is not surprising that many companies are having to use sub-contractors to keep up.

When using a sub-contractor, your business can become legally liable for any negligent act on behalf of the sub-contractor. That is why it is important that you are using a sub-contract agreement that contains the following:

  • Contractual risk transfer which includes:
    • Indemnification wording
    • Hold Harmless Agreement
    • Waiver of subrogation
  • Additional insured status on the sub-contractor’s insurance policy on a primary and non-contributory basis

Indemnification is the contractual obligation placed on the subcontractor to return the upper tier contractor (your business) to the same financial condition that existed prior to a loss or claim.

Hold Harmless Agreement requires the subcontractor to shield your business from the effects of the legal liability assignable to your business due to their wrong doing or act of negligence.

A Waiver of Subrogation requires the subcontractor to waive its right of recovery against your business.

If you are not currently using a sub-contract agreement and not sure where to start, then we can help! At Spherient Advisors, we provide the sub-contract agreement to our insureds at no additional cost.

Charlie Winkler, CPCU