General Contractors: Things You Should Be Collecting from Your Subcontractors

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If you’ve already started your own construction business, or are interested in starting your own business as a contractor in the near future, chances are you see the benefits of being your own boss. Being able to set your own schedule, decide which projects you want to bid and ultimately work on, and taking home those boss-sized paychecks are just a few of the pros to self-employment. But just because you want to own your own business doesn’t necessarily mean you want the stress of performing every aspect it takes to run that business. That’s a lot of hats, and the average sized head is not big enough to hold all of them.

Enter: Contractors. Or subcontractors, more specifically. Subcontractors differ from employees because these are the key guys (and gals) who have the specific training and know-how for those specialized tasks of your project, yet operate under their own business umbrella. Subcontractors are routinely the solution to providing specialized skilled labor, so you can delegate tasks and focus on the bigger picture. But as you award projects out to your construction subs, there are a few things you’ll need to make sure you are reviewing and collecting from them to stay in compliance with your own contractor insurance policies.

Step 1: Verify your Subcontractor is Properly Licensed

Does your state require contractors and artisans to carry a contractor license? Make sure your subcontractors are adhering to those requirements. Some states, such as California, only require a license of most tradesmen if they are performing projects greater than $500 in value. New Jersey, on the other hand, requires a license anytime a business or individual is engaged in home improvement or construction operations, regardless of the project size.

Double check with your state license board for the requirements of carrying a license. Chances are that if you’re required to have one, they are too. Also review the license board to verify the license is current and active. A sub may provide a license number, but if it’s suspended or expired, that means they aren’t compliant. If you are hiring unlicensed subcontractors, you run the risk of incurring fines from the state and being out of compliance with your insurance, which could be grounds to deny a claim if one should arise.

Step 2: Standard Subcontractor Agreement

Having subs complete a standard work contract is the first step toward bringing them onto your project. This not only good practice, but is often required by your own general liability insurance carrier.

A standard work contract for your subcontractors should outline the scope and length of the project, description of work performed, terms of payment, and what happens in the event of a suit or claim. It also outlines the insurance you require them to carry in order for them to step on the site. If you’re not already in the practice of having your subcontractors sign a standard work contract, it’s never too late to start now.

There are a few things your insurance carrier will typically require you to ask of your subs:

* Limits of insurance coverage equal or greater than your own. This makes sure that they have the adequate amount of coverage for the project so their carrier(s) can cover any loss in the event of a claim.
* A hold-harmless agreement, or an indemnity clause. An indemnity clause protects you against any legal action taken against you from a third party based on the actions of and work performed by the subcontractor. This way you or your insurance carrier doesn’t incur the expense of a claim when it’s someone else’s fault.

Step 3: Receive a Certificate of Insurance

Collecting a certificate of insurance, or COI, from your subcontractors is arguably equally as important as having them sign a contract. This is your “proof” that they have the insurance coverage you require in your contract. Just like the subcontractor contract, your carriers require you collect this COI and keep it on file. Proof is in quotations because, unfortunately, that piece of paper is just a piece of paper at the end of the day, so you should always follow up with the agency listed on the form to verify the insurance.

There are two main insurance policies you should always require your construction subs to list on the certificate: General Liability and Workers Compensation.

Verify your Subcontractor has General Liability insurance
Should a claim arise from the work your sub is performing on the project, you’ll want to make sure they have the insurance to cover the damages. You don’t want a claim to hit your insurance for work you didn’t actually perform. The indemnity in the subcontractor agreement[c] holds you harmless for the work of the subcontractor; making sure they have the insurance to cover a claim is your peace of mind.

Also, make sure their general liability insurance lists you as an additional insured. If the claim does trickle up to you and a homeowner / property manager wants to file a claim on your insurance (since you are top dog on the project), being additional insured means that you can use the subcontractors insurance as coverage instead of your own, further protecting your company from claims. This works to keep your insurance premiums as low as possible by maintaining a clean loss history with your carriers.

Verify your Subcontractor has Workers Compensation insurance
This is similar to verifying your subcontractor carriers general liability because you’ll want to make sure that if the subcontractor is injured on the job, they have their own coverage to pay against those injuries, rather than coming after you. Think your workers comp carrier will deny the claim if a subcontractor without insurance tries to file a claim on your workers comp? He’s a sub, there’s no coverage right? Not so fast….

Workers Compensation policies will cover all individuals hired by your company, whether they are W-2, subcontractors without workers compensation coverage, or that guy you hired for the day. Collecting a certificate showing a comp policy before the sub starts work is your assurance that if something goes awry, they won’t need to look to you to pay the medical bills. Verifying the coverage first is much easier than trying to find insurance at renewal with a claim on your policy.

Whether you’re hiring a subcontractor to paint the sheetrock you just hung on the wall, or to roof that new room addition on a custom home, priority number one will always be to protect you and your company. Refer to your own policies to see if there are any other requirements your carriers are mandating for your subcontractors. And always remember that if you have any questions feel free to reach out to contact us at Citizens, and we’ll be happy to help you navigate hiring subs.Construction Insurance

Workers Compensation For Contractors – What Is It and Who Needs It?

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As a contractor running your own business, figuring out what types of insurance you need for the business is one of the most important ways you can protect your hard work. And this important task, while crucial for minimizing risk, can be confusing and frustrating. This is especially true with Workers Compensation insurance, as not every state requires Workers Compensation, and not every state enforces the requirement for every business owner.

Sound like things are getting more complicated by the second? Fear not. We’ll break it down here and explain just who needs Workers Comp in the construction industry, and who can most likely skip it. If you’re in a hurry you can skip right to point and get our Workers Comp cheat sheet to give you the answer.

If you’re the type who wants all the gritty details, read on…

What is Workers Compensation?

Workers Compensation is a type of insurance policy that provides benefits to an employee or their dependents for work related injuries, disability or disease sustained by that employee. In plain English: if someone who works for you gets hurt on the job, or because of the job you hired them to do, Workers Comp covers the costs associated with that, so your business doesn’t foot the bill.

A Workers Comp policy is purchased and maintained by the employer for the benefit of the employee. Workers Compensation laws were established in the early 1900’s to address the conflicts between employees and employers along the issues of workplace injury and illness. Before these types of laws were adopted, employees used to have to sue their employers to recover any lost wages due to absence or compensation toward medical bills. Thankfully that’s no longer the case.

What does Workers Comp Cover?

Typically, Workers Compensation insurance will provide payment for medical bills related to diagnosis and treatment of a workplace injury or illness. Coverage may also extend to rehabilitation and recovery treatments. It also provides disability payments to the injured employee while they are unable to work. Lastly, Workers Comp can be used to cover injury or illness that is the result of multiple years of job operations or workplace conditions.

Are all Job Related Injuries Covered?

Most job related injuries in the construction industry will be covered by Workers Comp, but not all. Injuries stemming from intoxication, violation of company policy, self-infliction, or injuries sustained while not at work are almost always excluded from coverage under the policy. Almost all injuries that might not be eligible for coverage can be mitigated by creating and adhering to a workplace safety program and code of conduct.

So now that we know the basics of a Workers Compensation policy, does everyone need to carry it?

Who is Required to Carry Workers Comp Coverage?

Compensation laws have come along way since their early days, with nearly every state requiring employers to carry coverage if they have employees. We use the term “nearly” since insurance is governed by the state, rather than the federal government. Therefore, state laws encompassing Workers Comp vary by state.

It gets even a little more complicated in certain states, as requirements for Workers Comp are different depending on the industry in which you’re operating. Texas, for example, only requires private employers to carry a Workers Comp policy when employees will be working on public projects, whereas California requires all roofing contractors to carry Workers Compensation, regardless of whether or not they have an employee.

Though each state has their own guidelines, here’s a basic series of questions you can ask yourself to see if you may need a workers compensation policy:

 

Workers Comp Cheat Sheet Infographic

You’ll want to review your state’s requirements, but a basic rule of thumb is if you have an employee, you should probably carry a comp policy. Still confused, or have a unique situation you’d like to discuss? Give us a call or send us an email and we’ll be happy to help you work it out.

Contractor Insurance Checklist

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Contractor insurance can cover just about every aspect of your trade, protecting you, your business, and your assets from unexpected (and costly) events. From an unintended auto accident to an unhappy customer or an injured employee, contractor insurance defends against the risks that could permanently put you out of business.

Because every accident, incident, and act of nature is an opportunity for a lawsuit or monetary loss that could bring down everything you have worked so hard to build.

Contractor Insurance Checklist for General and Subcontractors

Whether you’re a general contractor, subcontractor, or construction business owner, your investment is at risk. One single accident or incident could cost you everything.

Luckily, you can easily defend your construction business with the right insurance coverage. So you can keep blazing ahead, building your future.

Use this checklist to find the contractor insurance policies that you simply can’t afford to ignore.

General Liability

In today’s litigious society, any small accident or incident could result in a lawsuit. Which is why general liability insurance should be the foundational policy of any contractor insurance coverage.

General liability protects you from third-party lawsuits in the event someone has experienced injury, bodily damage, or property damage as a result of your business.

The legal costs for litigation averages anywhere from $3,000 to $150,000, according to a 2005 SBA report.

A general liability policy for your business can cover the costs of a lawsuit that could cost your business in legal fees, lawyer’s fees, settlements, judgements, and even the high price of business interruption. When you have general liability coverage, your out of pocket expenses are typically the cost of your deductible — far less than the cost of litigation.

Inland Marine

The equipment you invest in doesn’t stay in one spot. Protect your mobile tools and equipment with inland marine insurance.

As you move your tools and mobile equipment from one project site to the next, the risk for damage or loss increases. Luckily, inland marine coverage goes where your equipment goes. Like the power tools you take to the construction site.

Workers’ Compensation

Do you use subcontractors to get the job done or do you have employees? Even a single, part-time worker could mean you need workers’ compensation insurance.

The construction industry is a high-risk one. Your employees are more at risk for illness or injury than the barista who made your coffee this morning. A slip, fall, or other accident could mean lost wages and costly medical bills for your employees.

Workers’ comp protects your employees from the high costs of medical treatment and lost wages in the event they’re injured or become ill while performing their job. Providing workers’ comp insurance is not only the right thing to do for your employees, in most states it is also required by law.

Commercial Auto

A contractor’s vehicle has many roles to fill. It’s a satellite office, a break room, a tool shed, and an equipment transporter. Your work truck (or van or suv) may even pull double-duty as your personal vehicle during the weekend; towing your family boat, picking up groceries, or taking the little league team out for ice cream after the game.

But don’t expect your personal auto coverage to work as hard as your truck does.

If you’re involved in an accident or have an auto claim while using your vehicle for business purposes, your personal auto coverage generally won’t cover it.

You’ll typically need commercial auto if you want to cover:

  • Autos used primarily for business purposes
  • Autos that are registered or leased to your business
  • Autos that your employees are driving

Don’t rely on personal auto insurance to protect your work autos from the risks of the road; commercial auto insurance is an important policy for contractors who spend more time out in the field than sitting in an office.

Commercial Property

Do you own or rent the building your construction business uses for your day-to-day operations? Either way, commercial property insurance is your key to defending it.

  • If you rent, commercial property can protect the stuff that’s inside your building, such as equipment, furniture, materials, and supplies.
  • If you own, commercial property can protect the building itself as well as the stuff that’s inside it.

No one ever plans for a fire, busted pipe, storm damage, theft, or vandalism. But with commercial property, you won’t have to pay the price for damage or loss to the place and things you need to operate.

Tip: Running your construction business from home? Even home-based businesses need a little extra property coverage. A standard homeowners insurance policy won’t always fully cover the business tools and equipment that you’ve got at home. Ask your insurance professional about a rider to your homeowners policy to protect your business investments.

Builders Risk

This one’s for the general contractors. A builders risk insurance policy protects your investment in a project during the course of construction, which is why it’s also referred to as a course of construction policy.

If a fire broke out on a residential project and destroyed the work you had already completed, as well as some valuable tools kept onsite and materials you’d already purchased, builders risk would be there to help you recoup your loss.

Builders risk policies are typically project specific and written on a 3-month, 6-month, or 12-month term. The coverage remains with the project until construction is completed.

Tip: There are any number of parties with an “insurance interest” in a project – including subcontractors, engineers, or anyone else who could lose out on labor, materials, supplies, and potential profits if there was a loss during construction. Builders risk policies are generally obtained by a project owner, developer, or general contractor who will list anyone with an insurable interest as a “named insured.”

General contractors should consider this policy as part of their contractor insurance checklist, but subcontractors should remember that they’ll want to be included as a named insured on any builders risk policy taken out by a general contractor or project owner.

Umbrella Coverage

Extra coverage is often overlooked but an umbrella policy could be one of the most important contractor insurance policies available. Umbrella insurance is there to protect you in the event of a claim that exceeds your policy limits.

Imagine the worst case scenario. An accident leads to severe third-party injuries and a lawsuit. The final result is a million dollar claim for court costs, judgements, and medical bills against your general liability policy. Your policy limit is only $500,000. Which means you’re left footing the bill for the other half a million.

Umbrella insurance can be applied when a covered claim exceeds the limits of an eligible underlying policy, like a general liability policy.

In the example above, your general liability policy would cover the million dollar claim up to its limit – $500,000 — and then your umbrella insurance would kick in to cover the remaining half a million dollars.

And all you’ll be responsible for is the cost of your policy deductibles.

How many of the above business insurance policies do you currently carry?

Chances are, you may have just discovered some holes in your contractor insurance defense plan. When you’ve worked hard to build up your construction business you want to protect it completely. Compare this checklist to your current insurance protection. If you’re missing any of the policies listed above it may be time to fortify your defenses so you can keep building your business without worry.

Contractor Insurance Auburn, CA

7 Lessons Your Business Can Learn From Safety Month

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During Safety Month, the National Safety Council highlighted key ways a business owner can prevent or limit the risk of injuries in the workplace. By understanding different ways to prevent workplace injuries, a company can focus on growth and development for long-term goals. Here are seven lessons your company can take away from this year’s Safety Month campaign.

#1: Prevent Falls at Work

The National Safety Council pointed out that a key risk to the health of employees is the possibility of falling. An employee may fall for a variety of reasons, such as tripping over objects or slipping on a wet floor.

The best way to prevent injuries at work is focusing on limiting the risk of falls. When the floors are wet, a business should always put out signs to warn employees. It is particularly important when weather conditions cause the water on the floors. Employees should also be aware of potential hazards, like cords or objects, that cause falls by tripping.

Raise awareness about the risks and point out hazards with signs and proper training.

#2: Reduce Worker Fatigue for a Safer Workplace

Fatigue, or feeling tired, also play a role in workplace accidents and injuries. When your employees are tired, they cannot concentrate on their activities or tasks. For individuals working with heavy machinery, chemicals or other harmful objects, fatigue may result in serious injuries.

Limit the risk to your employees by requiring breaks within a set period of time. For example, require a break for a meal every four hours and short breaks every hour to keep your employees sharp and ready for the next task.

While you cannot change an employee’s habits and behaviors outside of work, you can ensure that they understand the importance of proper rest to maintain their health and limit the risks associated with fatigue.

#3: Prepare for Shooters

Active shooters, or individuals attacking your company, are a concern for any business. Since a shooter does not always have specific reasons for choosing a business and may attack your company for convenience or similar factors, you must prepare your employees for the possibility of an active shooter situation if you want to keep them safe.

Ensure that every employee knows the proper protocol for your company. Set up a clear series of actions for employees and management to follow when a shooter enters your business. While the details depend on the situation, employees should be aware of every exit in the building. You also want to ensure that your employees know to leave the building when it is possible or to close and lock doors when they are in a safe location and cannot reach an exit. Provide training in relation to active shooters and the appropriate steps based on the business and building.

#4: Focus on Ergonomics at Work

Not all workplace injuries occur in warehouses, manufacturing facilities, or construction sites. Even office workers are at risk from work-related injuries.

A common complication for employees working at a desk or in an office setting is lower back pain or injuries from their activities at work. When employees sit for several hours, you want to provide ergonomic chairs and tools to limit the risk of injuries from their environment.

Ergonomics allow your employees to keep up with tasks without taking risks with their health. Encourage employees to get up and stretch or move around regularly through their day.

#5: Consistent Safety Training is Critical

Safety training is essential for every business. The training you offer depends on the risks to your employees, but you want to provide training early in their career as well as continued training over time. Ideally, your employees should go through updated safety training every few years to ensure that they stay up-to-date with the latest ways to limit the risks of their job.

#6: Don’t Neglect Risk Management

While training is essential for safety and you can take measures to reduce the risks to your employees, you also need to recognize that every business has unique risks and potential challenges.

Clarify the risks to your employees by identifying the possible injuries or concerns that may arise. Some risks, like falling, occur in any business. Other risks, like injuries from mishandling chemicals or tools, apply to specific types of companies and businesses. Identify the unique factors that may contribute to workplace injuries and clarify the possible concerns to develop an effective safety training program.

No business is too small or too new to have a good risk management plan in place.

#7: Personalize Safety Plans

The most effective safety plans are personalized for your particular industry and specific business operations. Your safety plan should focus on the specific risks to your business and your employees. By focusing on a specific plan of action, your employees understand the steps to take when facing a dangerous situation. They have the tools to manage the situation without severe injuries or complications with personal health.

Safety Month is a good time to evaluate the risks to your employees and take steps to eliminate or limit potential problems. Business owners must take measures to avoid workplace injuries and ensure that employees have clear solutions when an injury occurs or when they face a situation that may result in injuries.

Eliminating safety hazards in your workplace can ensure your employees are kept safe and you don’t have any worker’s compensation insurance claims. If you need a quote on workers compensation, we can help.

Preventing Falls During Construction

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Falls are the leading cause of construction death. Don’t think a fall can happen to you? Every year more than 200 construction workers are killed and another 1,000 are seriously injured by a fall. Falls happen every day and they can be deadly.

Preventing falls is one of the National Safety Council’s four areas of focus during 2017’s National Safety Month, but fall prevention is critical for construction professionals every day.

The Money Saving Benefits of Preventing Falls

Fall prevention saves lives; but it can also save money for your construction business, too. Fall prevention standards are among OSHA’s top 10 most frequently cited standards, which means costly safety fines for those cited. Jobsite accidents can also drive up insurance costs or worse — lead to expensive lawsuits and medical bills for firms without adequate insurance protection.

Investing in safety training and equipment is a small expense compared to the potential for fines, increased insurance costs, loss of time, and potential litigations that can happen after an accident.

How to Prevent Construction Falls

OSHA recommends three steps to prevent construction-related falls:

Plan Ahead

Plan ahead to get the job done safely. Know what job needs to be done, how it will be done, and what safety equipment will be needed to complete the task. Take a page from some of the largest construction firms around with the best safety records: have a daily crew meetings in which supervisors go over the daily work plan and job-specific safety training for those potentially exposed to falls.

Provide the Right Equipment

The biggest fall risk in construction is to workers who are 6 feet or more above lower levels. These workers can be protected with the right safety equipment for the job. Beamers, retractables, rope-grabs, beam straps, butterfly anchors, concrete plunger anchors and retractable lanyards can all be useful tools that can save lives when used correctly. Employers should also provide the right equipment for the job, including the right kinds of ladders and scaffolds.

Train Everyone

Safety equipment saves lives… when it’s used correctly. Every worker should be trained on recognizing hazards on the job, the proper use of safety equipment, and identifying failures in equipment. Even a tiny tear in the webbing lanyard of a harness can lower its failure point up to 40%. Just providing safety equipment isn’t enough; it’s critical to be sure that equipment is maintained, is working properly, and is used correctly.

Protecting Yourself from Falls

Construction owners, managers, and supervisors have a big responsibility for fall prevention on the construction site. But contractors and workers should also take responsibility for jobsite safety. A Kimberly-Clark professional survey found that discomfort was the leading reason that workers were reluctant to wear PPE (personal protective equipment). The second most common reason was the belief that PPE wasn’t necessary for the task; workers had performed a task for years and never been injured. The third most common reason for not wearing safety equipment was that it was unattractive or ill-fitting.

Not wearing or using safety equipment because it’s uncomfortable, unattractive, or because you’ve never needed it before can put you at risk for a fatal fall.

A fall may cost your boss in fines, citations, or increased insurance costs — but it could cost you your life.

OSHA Tips to Prevent Falls for Workers

Fall protection guidelines for workers, to keep you safe from the most common causes of falls:

Prevent falls from roofs

  • Wear a harness and always stay connected
  • Make sure your harness fits
  • Use guardrails or lifelines Inspect all fall protection equipment before use
  • Guard or cover all holes, openings, and skylights

Prevent falls from ladders

  • Choose the right ladder for the job
  • Maintain three points of contact
  • Secure the ladder
  • Always face the ladder

 

Prevent falls from scaffolds

  • Use fully planked scaffolds
  • Ensure proper access to scaffold
  • Plumb and level
  • Complete ALL guardrails
  • Ensure stable footing – inspect before use (by competent person)

Prevent general falls

  • Understand your company’s written fall prevention plan
  • Participate in fall prevention training
  • Use fall-protection equipment, if required for the job
  • Be sure the equipment is right for the task, in good condition, and fits properly
  • Inspect fall protection equipment and devices before each use
  • Make sure that floor holes, open shafts, and riser penetrations are protected by sturdy guardrails or covers
  • Get specialized training before working on scaffolds, lifts, or ladders
  • When using scaffolds, make sure there is proper access, full planking, stable footing, and guard railing
  • Keep your feet firmly on the platform on a boom lift, and tie-off at all times.
  • Chose the correct ladder for the task, read the instructions, and be sure that the ladder is in good condition.
  • Check for surrounding hazards, stable footing, and the proper angle.
  • Identify skylights, and make sure they are properly protected.
  • Contact your supervisor if you see fall hazards or have any questions about fall prevention. Do not work until unsafe conditions have been corrected.

Create a Culture of Safety

Small to medium-sized construction firms may struggle with investing the time and money into safety programs, but the initial investment can pay off in the long run. When you create a safety-conscious culture at your company, you can prevent accidents, lower overall business costs, and save lives.

Make Safety a Priority

A survey commissioned by the International Safety Equipment Association of safety influencers in the heavy construction industry found the main reason workers chose not to wear personal protective equipment was because their employers don’t require or enforce usage. Your workers will prioritize what you prioritize.

Make Safety a Habit

Have daily crew meetings and briefs where job-specific safety measures are discussed. Make safety issues part of every meeting. Integrate safety awareness and practices throughout all aspects of the project.

Make a Top Down Commitment

An upper management commitment to safety as a top priority can be one of the most effective elements in any safety program. Safety concerns should come from upper management to lower management, safety directors to supervisors. The best way to create a culture of safety at your company is to be sure that everyone is committed to worker safety at every level in the organization.