In the construction industry, subcontracting is essential to delivering projects efficiently and on time. However, while it’s common practice to bring in external trades and specialists, too many contractors overlook a critical risk management requirement: checking the liability insurance of bona fide subcontractors.
At Champion Insurance Group, we specialise in construction insurance and see this issue arise regularly. Not only is checking subcontractor insurance a condition in most contractors’ insurance policies, but it’s also a vital element of best practice that protects your business financially and contractually.
What Is a Bona Fide Subcontractor?
A bona fide subcontractor (BFSC) is an independent contractor who supplies their own tools, materials, and labour, and operates under their own direction. Crucially, bona fide subcontractors should carry their own liability insurance.
This is different from labour-only subcontractors, who are supervised by the main contractor and are generally covered under the contractor’s own employers’ and public liability policies.
The Insurance Requirements: Two Key Points to Check
Most insurers require their policyholders to ensure that any bona fide subcontractor they engage holds:
1. Public Liability Insurance with a limit at least equal to that of the main contractor’s policy.
2. A policy that includes an “Indemnity to Principal” clause.
Failing to check and document these requirements could leave your business exposed and your insurance policy invalidated.
Why Subcontractors’ Limits Should Match Yours
If a claim arises from the actions of a subcontractor—such as injury to a third party or property damage—and the subcontractor’s insurance limit is lower than yours, the shortfall may fall back onto your policy. Worse still, if your insurer requires subcontractors to have matching limits and you haven’t verified this, your own claim could be rejected due to breach of policy conditions.
This requirement helps ensure that in the event of a claim, the subcontractor’s insurer can fully respond without exposing the main contractor to uninsured liabilities.
What Is an “Indemnity to Principal” Clause?
The “Indemnity to Principal” clause is a vital inclusion in a subcontractor’s liability policy. It means that the main contractor (you) is recognised as an additional insured party under the subcontractor’s policy. In the event of a claim, this allows the subcontractor’s insurer to indemnify both the subcontractor and the principal contractor, providing greater protection for your business.
Without this clause, there’s a risk that claims could fall solely on your own insurance, even if the subcontractor was at fault.
Best Practice and Policy Compliance
For most contractor insurance policies, checking and recording the insurance details of all bona fide subcontractors is not optional—it’s a condition of cover. But even where not explicitly required, it remains a best practice risk management measure. A simple failure to obtain and retain valid insurance documentation could lead to claims being delayed, disputed, or declined altogether.
How Champion Insurance Group Can Help
We understand that manually checking insurance documents from multiple subcontractors can be time-consuming and prone to error. That’s why Champion Insurance Group supports our construction clients not just with expert advice and tailored insurance solutions, but also with a technological system that streamlines this entire process.
We remove the hassle while helping you stay compliant and protected—another reason to insure your construction business with Champion Insurance Group.
Ready to Strengthen Your Risk Management?
If you’re unsure whether your current subcontractor processes meet your policy conditions—or simply want to make compliance easier—speak to the construction insurance experts at Champion Insurance Group.
📞 Call us today on 03330 430 430
📧 Email our team to arrange a no-obligation review of your insurance programme info@ChampionInsure.co.uk
Let’s make sure your cover works as hard as you do.
