Contractors, Insurance & Shared Risk

Contractors, insurance and shared risk.

Contractors, Insurance & Shared Risk


Knowing Subcontractor Insurance Status is Critical Risk Management


Your organization is at risk if your subcontractors are involved in incidents and have inadequate insurance. It’s worse if they don’t have any policies in place at all.

Common incidents are worker injuries, facility damage, vehicle and equipment collisions, material losses due to theft or vandalism, or, increasingly likely, extreme weather or cyber security events.  Losses and claims involving uninsured contractors are an everyday thing. Your insurance agent can likely give you multiple examples from your industry and region.

Often, prime and general contractors don’t know their subcontractor’s insurance status.  An unknown risk is an unmanaged risk.

The primary exposure here is financial and legal liability.  Obviously, litigation or an action by an involved third party further drives up costs and sometimes reputational damage.

The good news is that the effort, knowledge, and cost to control these exposures are relatively moderate but take some resources and, ideally, technology.

Primary business goals should be:
  • know that contractors are adequately insured when they start at the worksite, and
  • that they remain insured for the entire active period of the contract.
How Taking Action Benefits Your Organization:

Knowing your contractor’s insurance status is simply good business practice. Doing so will reduce a wide swath of your company’s risk. Considering all the money spent reducing risk on complex worksites, insurance is a complete bargain given its high degree of financial protection.

Take Action:

  • Get a valid certificate of insurance when the contractor starts on the job site.
  • Ensure expiry dates are tracked. Technology is ideal for this: automated tracking and notifications save time and reduce errors.
  • If you use certificate tracking software, configure it so that your contractors and internal stakeholders are notified of expiring certificates.
  • Develop a policy for the organization’s actions when certificates expire. This policy should include who is informed, who will interact with the contractor, and what steps will be taken.


How does one manage these deliverables? The best tool for this job is database software configured to track certificate dates and communicate status, preferably by email or an app.

Commercial database products like MS Access or a third-party certificate management service are options for clients. Prime contractors tend to implement them in high-risk industries.  

Most third-party services incorporate document verification functions that scrub upload mistakes by comparing the certificate to standardized criteria, like insurance type, amount, additionally named parties, and other specifics.

Not using, or aren’t interested in, automated certificate management or a third-party service? Here’s our guidance:

  • Get a valid insurance certificate when the contractor starts work on your site.
  • Then, get a new certificate with each invoicing period, generally every 30 days, as the job progresses.

Knowing that your service providers are adequately insured is a high-value risk reduction activity and a contractor management best practice.

Contractor management is good business.

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