AboutKristen Mulcahy, CIC Expertise My specialty is commercial insurance for business owners. I can answer questions regarding
liability, property, auto, workers compensation, directors and officers, umbrellas and
risk management for all types of businesses. Risk management or loss control, is taking
measures to reduce the chances of a loss in the first place or, helping you prevent it
from happening again. Insurance can be complicated and confusing and there are no stupid
questions! I own a Risk Management company in New England that provides insurance consultations
to business owners and sight inspections for insurance companies.
I read your earlier response to James and that helped but I have a few more questions--we have a similar situation. We are considering hiring a well recommended home improvement contractor that we go to church with. He is a sole proprietor and has two fellows that work with him pretty much full time, but are not considered employees (individual contractors). He is not a licensed contractor, does not carry and workmans comp or liability insurance and has releases signed by his two main workers.
The scope of the job requires a building permit and General Contractors License, however, as the homeowner, my county allows me to be my own GC and he would be considered a sub. We are building a large addition onto our 110 year old farm house that requires demolition of an existing space and adding about 500 square feet. My two concerns are my liability for any workers on my property if I am the General Contractor and Contractor's liability insurance to protect against unforeseen structural damage that would be costly to remedy (beyond the ability of my home improvement guy). He will be using subs to dig the foundation, lay the brickwork and lay the tile. So, I am the GC and all of these individuals are supposedly subs. What is my liability?? Thanks so much for taking time for this!
Answer Mary;
He sounds like a nice guy, probably does good work. However, if I were you, I would not hire him in any way shape or form. First, let me answer your direct question; YES, if you are the GC, you will be liable for anything and everything that your "subs" do, including any injuries they suffer while on the job. There are very strict IRS guidelines as to who is and who is not an "independent contractor". If this gentleman from your church has 2 guys that work with him, he tells them where the job is, what time to be there, what work needs to be done, when they can leave, etc... they are NOT independent contractors. You cannot avoid the IRS regarding independent contractors simply by a written agreement. Additionally, even if you could, they have an agreement with the man from your church, NOT with you. Almost every single state requires businesses with X number of employees to carry workers compensation insurance. My guess is, in yours, he's required to have it and is avoiding this responsibility by using the written agreement. Just think, what do you suppose will happen if one of these "workers" is seriously and permanently injured while working for him? There may be no medical coverage for their injuries, they can no longer work as they did before the accident, therefore they have no income, they may not be able to walk ever again, maybe they lost their sight, etc... do you really think that 1) the injured worker will just say, "Oh well, I agreed to release him from liability" or 2) that a judge would let that agreement stand? No way. That injured worker is going to sue anyone and everyone to get the money he needs due to his injuries. And that includes you and all of your personal assets.
If you choose to act as your own GC, that is absolutely fine but you need to be very diligent and only hire contractors that are licensed, bonded and insured. If you don't, you're asking for a lot of trouble. Licensed signifies that the proper state agency has found them competent to perform the work they are licensed for. Bonded is a financial guarantee that they will complete the work they are hired to do. Insured means that they are responsible and professional and if an accident happens or something else goes wrong, they have insurance/financial backing to correct or rectify the situation. You have a 110 year old farm house, things can and do go wrong during construction, especially with older structures. Personally, I'd want someone highly qualified working on the house if it were mine.
If you do act as your own GC here are some guidelines; 1) No matter who you hire, require that they provide you with a Certificate of Insurance, proof that they have their own General Liability Insurance and hopefully, their own Workers Compensation insurance in place. 2) Require that they name you as an Additional Insured. If you decide to hire a GC, you need the same Certificate from them. 3) Speak to your insurance agent and purchase a Builder's Risk policy for protection during construction.
If your church friend does have General Liability Insurance and can prove it, you could discuss with him you, as the GC, purchasing a Workers Compensation policy for the job and deducting the cost from the cost of the project. It's an option. You'd still want to ask for the Certificate mentioned above from any other subs you hire.
My opinion Mary is that the construction industry is slow right now, you should have no trouble finding a reasonably priced, properly licensed, bonded and insured General Contractor to handle your addition. They will then manage and be responsible for all subs hired. They will obtain the Certificates, they will obtain the permits, and they will have the resources if the job has unexpected complications (they all do). I think it would be much less stressful than trying to manage the process yourself and dodge the bullets and extreme liability that comes along with unlicensed home improvement handymen. But again, this is my opinion. If you disagree and want/need more information, please feel free to email me again.
