Hiring Subcontractors Directly... Liability Insurance?

Question

Hi All,

I'm about to do a bathroom and kitchen gut job and  wanted to hire out subcontractors since I have some time on my hands to  call them directly.. since there is no special quirk about my project I  don't believe hiring a General Contractor makes sense and I've read  other posts where hiring specific trades directly saves a ton of  $$$$.....

My question is, since I presumed the GC would have furnished the Certificate of Liability which is required by this particular building my unit is in, do all sub-trades generally carry the same Certificate of Liability?  Thank you in advance

Account Closed · Answer

Here in MD, the law states that anyone performing contracting work on residential structures (i.e., those with four or fewer dwelling units and the interiors of condominiums) must be properly licensed by the MHIC and will have one of two types of licenses: Contractor or Subcontractor.  Maryland does not issue a "General Contractor" license for residential work.  For new construction, one will have a MHBR number, and for existing structures, it'll be a MHIC number.  General Contractor licenses are issued by the counties and are for commercial work.

Regarding residential work on existing structures, only a licensed Contractor is legally permitted to enter into an agreement with a licensed Subcontractor (save for those who hold trade specific licenses for electrical, plumbing and HVACR).

That said, those who are commonly thought of as subcontractors (painters, tile-setters, etc.) and want to contract directly with those other than licensed Contractors, then they must have the MHIC Contractors license and not merely the Subcontractor one.

In short, you may want to verify with the laws that govern the project location to determine what requirements may exist there in so much as with whom you are allowed to contract with.

And regardless of whether your hire a GC or not, every single subcontractor should have liability insurance (and worker's comp or a waiver if allowed).  Additionally, while the project is underway I believe it prudent to carry coverage accordingly (e.g., builder's risk, vacant, etc.).

Account Closed · Answer

My answer is generalities only and may or may not apply to your particular circumstance. For simplicity sake I will break down the word into two types of subcontractors.

Category 1 is a sub that regularly does jobs for other GCs and has a number of employees. Generally this type of contractor will carry similar liability insurance as a GC and will be required by law to carry workers comp. The reason being that good GCs have insurance requirements a sub must meet in order to protect themselves from claims arising from a subcontractor. However, you should still require a certificate of insurance, require the contractor name you and the association as additional insured and follow all the procedures your association insurance agent has put in place.

Category 2 is a small contractor whose only employees are owners of the company and do mostly small residential/single family jobs. It is pretty much a role of the dice as to whether or not this type of contractor has solid insurance and I would be very diligent in making sure this type of contractor is properly covered and ask your agent to review the actual policy in addition to the certificate.