When it comes to the construction industry, and especially when it involves complex projects such as home or commercial building, the relationship between general contractors, and their subcontractors, is an important part of the process.
In construction, the general contractor is responsible for overseeing and managing the project. They also hire subcontractors such as plumbers, carpenters, and electricians to complete each stage and component.
It is therefore vital that the general contractor and subcontractor relationship works in harmony to ensure each phase is completed on time, as well as the completion of the entire project by the deadline. When it comes to any business relationship, and in particular when asking if general contractors are responsible for subcontractor negligence there is a lot of valuable information both parties want to retain before making commitments.
We walk through the relationship between a general contractor and a subcontractor and the challenges that each party faces in terms of contracts, insurance, and liability.
What are the challenges in relationships between general contractors and subcontractors?
When you look at the responsibility of the prime contractor for subcontractors, it’s not all smooth sailing.
When developing a strong relationship, one of the most important responsibilities of general contractors is to create a mutually-beneficial relationship with subcontractors. Some issues are given more priority than others.
Payments
Cash flow management can be difficult for subcontractors. Assuring the timely payment of subcontractors is part of a contractor’s prime responsibility.
Subcontractors often spend large sums before even starting a project. The expenditures could include the purchase of the materials required to complete the job, and then, once the work has begun, more funding will be needed to pay the employees. A subcontractor who has difficulty paying their suppliers or meeting payroll may be unwilling to accept new work.
Customer expectations
The relationship between general contractors and subcontractors would not exist if the customer did not need your service. It can be hard to keep customers happy.
Imagine a developer who takes on a project to build 100 houses. The customer may expect that each home will be constructed within a similar timeframe if the homes are of the same size and layout. When there is a problem retaining skilled workers on behalf of the subcontractor, delays can occur. Failure to communicate and coordinate with the general contractor and the customer could have serious financial and reputational consequences.
Unfamiliarity
Knowing who your subcontractor is should be a contractor’s prime responsibility.
It’s wise to do some research before hiring a subcontractor and having to deal with the question of whether a general contractor is responsible for the subcontractor’s negligence or not. This includes the types of jobs the subcontractor has undertaken, the general financial situation of the company, and if the firm has been involved in ongoing legal disputes or lawsuits. You should be wary of any unusual trends or patterns in the jobs performed, cash flow, and a history involving disputes.
What are the roles and responsibilities of general contractors?
Sorting Out Red Tape
General contractor responsibilities include ensuring that building permits have been obtained and that the general contractor license has been updated.
Certificates of insurance should be used to verify the general insurance and contractors’ insurance status. General contractors could be held responsible for the negligence of subcontractors if they don’t have proper insurance.
Managing Worksite
After administrative tasks are completed, the focus turns to the actual job site.
The general contractor is responsible for the security of the location and ensuring that materials are kept out of sight and away from potential thieves. The general contractor is also responsible for providing workers with sanitary facilities to use.
Assessment of Liability
You’ll first want to consider the liability exposure when determining if general contractors are responsible for subcontractors.
The resulting dollar amount could quickly escalate if a subcontractor causes property damage or one of their employees is injured at work. You must therefore ensure that the subcontractor’s general liability insurance policies are current and valid. You may not be held liable as a general contractor for the negligence of a contract subcontractor. However, wasting time and money on a legal investigation would not be prudent.
Insurance Requirements
You’ll need to ensure that your insurance meets the required standards as a general contractor.
It is particularly important if you have employees, as workers’ compensation insurance will protect you from the medical costs incurred by an accident on the job. If you are wondering whether or not a general contractor can be held responsible for the negligence of a subcontractor, you will likely find that the answer is “no,” if the subcontractor’s insurance program has the required amount of general liability coverage per incident.
Contract Review
The contract should be reviewed thoroughly before work begins to ensure that all parties are aware of their duties, rights, and responsibilities.
The contract should outline the work scope for both general contractors, and subs, and include a description, pricing, a schedule of payments, a breakdown of responsibilities, and legal language to describe handling of disputes or terminations. All parties should consult an attorney to review the contract for any shortcomings or inconsistencies, regardless of their experience.
Focus on the details
You may want to concentrate on the physical aspects of the work and leave administrative details to chance. Don’t take the contract details and the general contractor’s responsibilities for granted. You could suffer a financial loss.
A small omission, or a clause that is incorrectly drafted, could have devastating effects and prevent you from getting future work. An insurance program designed for contractors can be a crucial tool in protecting each party’s assets and interests. Contact BizInsure to customize your insurance program for your business.
