How to read the insurance section of a subcontract

The insurance section of a subcontract asks for two things: limits, and endorsements that change how your policy responds for the GC and the owner. Read it one line at a time. Match every line to a number on your declarations page or an endorsement on your policy, and treat anything you can’t match as a gap to close before you sign, since the GC’s reviewer will find it the day your certificate comes in.

What insurance do I need as a subcontractor?

The subcontract sets the exact list. Most ask for four policies:

• General liability, commonly $1,000,000 each occurrence and $2,000,000 aggregate
• Workers’ comp, which most states require once you have employees, or a valid exemption where the rules allow one
• Commercial auto for the vehicles you drive to the job
• An umbrella when the contract asks for more than the policies below carry

Then the clause asks for endorsements on those policies, which is where reviewers look hardest. Whether a one-person shop needs all of this is its own question, covered in do subcontractors need their own insurance.

Start with the limits

Say the clause reads like this: general liability of $1,000,000 each occurrence, $2,000,000 general aggregate and $2,000,000 products and completed operations aggregate; auto liability of $1,000,000 combined single limit; workers’ comp at statutory limits, with employer’s liability of $1,000,000 each accident, $1,000,000 disease each employee and $1,000,000 disease policy limit; and a $5,000,000 umbrella.

Check every number against your declarations pages, not against an old certificate. Employer’s liability is a common miss, because many comp policies carry limits well below $1,000,000 on all three lines unless someone asked for more when the policy was written. Some contracts let an umbrella that sits over employer’s liability make up the difference. Others don’t. Ask in writing.

Additional insured for ongoing and completed operations

Additional insured status lets the GC, and often the owner, claim coverage directly under your general liability policy when a lawsuit arises from your work. Construction contracts usually want it twice. The standard forms are CG 20 10 for ongoing operations, while you’re on the job, and CG 20 37 for completed operations, after you’ve left. Many contractors carry blanket versions instead, which add anyone you’ve agreed in a written contract to add.

Three details decide whether yours passes review.

Who has to be added

Contracts often list the owner, the GC, the lender and “their officers, employees and agents.” Some blanket endorsements reach only the party you signed the contract with, which is the GC, and leave the owner out. If the owner is on the list, your endorsement needs wording that reaches every party the contract names. It’s a frequent rejection.

Which edition the contract names

A clause that asks for “CG 20 10 11 85 or its equivalent” wants a 1985 edition that covered finished work and ongoing work in one endorsement. Many carriers no longer offer it. The usual answer is a current CG 20 10 paired with CG 20 37, but whether that satisfies the contract is the GC’s decision, so ask for it in writing before you sign.

What the endorsement actually gives

Current editions narrow the coverage on purpose. They cover injury or damage caused at least in part by your acts or omissions, not the GC’s own sole negligence. They give the additional insured no more than your contract requires, and the limit is the lesser of what the contract asks for and what your policy carries. That’s normal, and experienced GCs expect it.

What does primary and noncontributory mean on my policy?

It means your policy pays first on a claim covered by the additional insured endorsement, and it won’t ask the GC’s own policy to share the loss. Without it, the other insurance clauses in the two policies decide who pays, and that argument can hold up a claim. The standard endorsement is CG 20 01. Many blanket endorsements build it in. Find the words on the endorsement itself, because a certificate that says “primary and noncontributory” doesn’t make it so.

Waiver of subrogation, one policy at a time

A waiver of subrogation stops your insurer from paying a claim and then going after the GC to get its money back. Contracts usually want one on general liability, auto and workers’ comp, and each policy needs its own endorsement: CG 24 04 or a blanket version on liability, WC 00 03 13 on comp, and a separate form on auto. Some add the umbrella. Our waiver of subrogation guide covers blanket versus scheduled waivers and why some carriers charge for the comp one.

Why does the GC care about a per project aggregate?

Your general aggregate is the most your policy pays in a policy year for most claims combined. A contract that asks for a per project aggregate wants CG 25 03, which gives each construction project its own aggregate, so claims on other jobs can’t use up the limit the GC is counting on.

Say you carry a $2,000,000 aggregate, and two claims on a different job have already paid $1,500,000 this year. Without CG 25 03, every other project you’re on shares the $500,000 that’s left. With it, this project starts with its own $2,000,000. The occurrence limit still applies.

Does your umbrella follow form?

An umbrella or excess policy sits on top of your general liability, auto and employer’s liability. “Follows form” means it covers on the same terms as the policies underneath, so the additional insured, primary and noncontributory and waiver wording you bought below carries up to the higher limit. Not every umbrella works that way. Some have their own exclusions and their own definition of who counts as an insured, and a GC who asked for $5,000,000 will read them.

Ask whether your umbrella extends insured status to anyone who’s an additional insured on the policies below, and whether it can be primary and noncontributory to the GC’s own umbrella. Some contracts go further and want your umbrella to pay before the GC’s own primary policy does, which takes specific wording. Some umbrellas can’t do that.

Can the GC get notice if your policy is cancelled?

Many subcontracts say the GC must get 30 days’ written notice if your policy is cancelled. A certificate can’t promise that. The certificate only says notice will follow the policy provisions, and a standard policy owes notice to you, not the GC. To notify the GC, your policy needs an endorsement that sends notice to the people listed on it. Not every carrier offers one, and some that do give only 10 days when the cancellation is for nonpayment. If your policy can’t do what the clause asks, raise it with the GC now.

How long does completed operations coverage have to last?

Read this line twice. Contracts often require you to keep completed operations coverage, with the GC as an additional insured, for a set number of years after the project is finished. Some tie it to the period during which the owner can still bring a claim over the work, which runs ten years or more in some places.

Contractor liability policies are usually written on an occurrence basis, so the policy that answers a completed operations claim is the one in force when the damage happens, not when you did the work. That makes the promise about every future renewal.

Say you finish a job in 2026 under a contract that requires three years of completed operations coverage. Every policy you buy through 2029 needs completed operations coverage and an additional insured endorsement that still reaches that GC, even if you change carriers or never work for that GC again. Blanket wording makes that easy. Dropping it at a renewal breaks the promise for every job still inside its window.

Indemnity is not insurance

The indemnity, or hold harmless, paragraph usually sits right next to the insurance section, and it’s easy to read them as one promise. They aren’t. Indemnity is your promise to defend the GC and pay certain losses, and you owe it whether or not any insurance responds.

Your general liability policy may pick up part of it, through what the policy calls an insured contract, but only within its own terms and limits. Many states also limit how far indemnity can reach in construction contracts, and the rules differ. Have an attorney review that paragraph. What you’ve agreed to there is a legal question, not a coverage one.

A checklist to send your agent

Before you sign, send your agent the full insurance section, plus any exhibit or requirements page it refers to, and ask for a written answer to each of these:

1. Do my limits meet every number in the clause, including employer’s liability, the umbrella and a per project aggregate?
2. Does my additional insured endorsement cover ongoing and completed operations, and does it reach everyone the contract names, including the owner?
3. If the contract names an old edition, what can we offer instead?
4. Is primary and noncontributory wording on the endorsement itself?
5. Do I have a waiver of subrogation on each policy the contract lists, and is my comp waiver blanket or does it need this GC’s name?
6. Does my umbrella follow form, and does it carry additional insured status and primary wording up?
7. Can my policy send the GC cancellation notice, and how many days?
8. Can I keep completed operations coverage for as many years as the contract requires?
9. Does anything on my policy exclude this job, such as residential work, height limits or a wrap-up program?
10. Does the contract cap my deductible, set a minimum rating for my insurer, or require copies of the endorsements with the certificate?

If you’d rather have that read done for you, send the insurance section through our contract review, and we’ll explain what each line requires and which ones your current policy doesn’t meet yet. If you’re the GC setting these requirements for your own subs, see general contractors.