Costs of Uninsured Subcontractors
When you’re running a small business, it can be tempting to save money by hiring an uninsured contractor. But there are real risks to this decision. You could get stuck with thousands of dollars worth of repairs if the subcontractor is injured on the job or doesn't complete the work they were hired to do.
The cost of hiring an uninsured subcontractor is not limited to the immediate costs of paying them. It also includes the costs of hiring a lawyer, paying damages, and increased insurance premiums.
Hiring a Lawyer: If you are sued by your contractor's insurance company, you will need to hire a lawyer to represent yourself in court. This could be an expensive proposition depending on how long the case drags out and what kind of expert witnesses are needed.
Paying Damages: The law generally requires that someone who has been injured as a result of another party's negligence should be compensated for their losses—even if they were negligent themselves! This can include medical bills, lost wages from missed work time, pain and suffering awards in some cases…the list goes on! If this becomes necessary for multiple people involved in your project (such as subcontractors), it can add up quickly!
Increased Insurance Premiums: When hiring someone new for any reason—whether because they're new or because they've moved into town—you should check with your insurance broker about whether or not raising premium rates is necessary based on their profile information provided. If it is, then this could mean that you're paying more for insurance than you would have before the incident.
Yearly Insurance audits: Every year when you go through an insurance audit to ensure you had the proper coverage for your employees and contractors - any uninsured subcontractors could cost you additional money at the end of the audit for not having proper insurance on your job site. This will eat away at your profits.
Lost Business: This one is often overlooked by many people, but it can be a big deal! If you’re in the construction or design business, then losing a customer could mean losing future work from them—so it's important to make sure that your reputation doesn't suffer too much.
Small Businesses Beware: The Risks of Using Uninsured Contractors
Using uninsured contractors can be risky. Here's why:
You may have to pay for the damages caused by an uninsured subcontractor's negligence or flaws in their work, even if it was not your fault. This can be very costly and ruinous for a small business.
They may not complete their work or perform it poorly, which could result in you having to hire another contractor (and pay them) to make up for what was missed.
If an uninsured subcontractor does not get paid by you or another party, they are less likely to honor contracts with you because they have no legal obligation to do so.
They may not be licensed, which means they cannot legally perform certain types of work. Employing an uninsured subcontractor can also be illegal if they are working on projects that require licensing (such as construction).
They may not be bonded, which means they cannot legally perform certain types of work. Bonding is a legal requirement in many states, including California and Nevada. If an uninsured subcontractor fails to complete their job or performs it poorly, you may have to pay for the damages caused by their negligence.
There are risks to hiring uninsured subcontractors, but you can legally protect your business.
Uninsured subcontractors can be a risk to your business. A legal requirement, they are not covered by the insurance you carry for your business. This means you are financially responsible if they get hurt on the job.
You can't rely on your own insurance to cover these claims, as it only protects you against liability when an employee is injured while working for you. If an uninsured subcontractor makes a claim against your company, it's up to them to prove that their injury was connected to work performed at your home or business site. They also have to provide medical evidence that supports their claim before they can receive compensation (if any).
Unfortunately, many subcontractors don't carry the proper insurance or have the required documentation for their claims. This means that if a contractor is injured on your property and doesn't provide proof of insurance, you could be held liable for their medical expenses.
This is why it's important to verify that all of your subcontractors are properly insured. You may want to consider adding this requirement into your contract with them and/or asking for a copy of their proof of liability insurance before they begin working on your project.
Conclusion
We hope that this article has helped you to understand the risks of hiring uninsured contractors, as well as the legal protection available for small businesses. If you have any questions about this topic, please contact us today! We’d be happy to assist.
