Contractor vs. Subcontractor: Differences and Liabilities

The world of construction involves a complex web of roles and responsibilities. While both contractors and subcontractors play essential parts in bringing a project to fruition, their legal responsibilities, contract needs, and insurance policies can differ significantly. 

Understanding these distinctions is crucial for any party involved in a construction project, from the client to the workers themselves. This knowledge empowers informed decision-making, fosters clear communication, and ultimately mitigates potential risks throughout the construction lifecycle.

Let's explore the key differences in contractor vs. subcontractor liabilities and dive into essential construction insurance policies to keep your company secure.

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Contractor vs Subcontractor: Roles and Responsibilities

Contractors 

The general contractor oversees the entire construction process from start to finish. As the project management head, they act as the project owner’s central point of contact and manage all aspects to ensure the project is completed on time. 

Here's a deeper dive into a general contractor's key responsibilities:

• Project Planning and Management: Contractors are project managers who make a detailed project plan that includes the schedule, budget, and list of tasks needed to be done. They procure required licenses and permits and ensure all materials and equipment are bought on time and within budget.
• Managing and Hiring Subcontractors: General contractors hire and manage subcontractors to do specialized tasks on a contractual basis, like plumbing and electrical work.
• Quality Control and Safety: Contractors make sure that all safety and building codes are followed during the project. They do regular checks to make sure quality standards are met and any problems are dealt with right away.
• Ultimate Responsibility: The contractor is ultimately responsible for the project's success or failure which also involves the subcontractors’ work. No matter who did the work, the contractor is responsible for any problems that come up during the building process.

Subcontractors 

What is a sub contractor vs. a contractor? Subcontractors are skilled professionals the main contractor hires to work on project parts requiring their specialized services. They work for the contractor, not the project owner. 

Here are their key responsibilities and how subcontractors differ from the prime contractor:

• Specialized Expertise: Subcontractors focus on finishing specialized tasks within the contractor’s deadline. 
• Following Instructions and Meeting Deadlines: They are directly supervised by the contractor and given detailed instructions and specifications. It’s the subcontractors' job to follow these instructions, meet the due dates, and keep up with quality standards.
• Quality Workmanship: Subcontractors are responsible for the quality of the work they do in the areas assigned to them. Their excellent work should match the project and industry standards.
• Liability Within Their Scope: While the contractor holds ultimate responsibility, subcontractors are not entirely off the hook. They can be held liable for their work under the terms of their subcontract agreement.

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Contractor vs. Subcontractor: Insurance Needs 

How do insurance for contractor vs. subcontractor differ? Both parties require specific liability coverage to manage risks and financially safeguard themselves from unexpected events that can disrupt or derail a project. Here, we'll unpack the essential insurance needs for both contractors and subcontractors, ensuring they’re secure and well-protected.

General Liability Insurance 

This fundamental policy protects both contractors and subcontractors from third-party claims of bodily injury, property damage or libel arising from incidents during construction. 

However, only contractors are required by the project owner to get general liability insurance. Subcontractors aren’t required to have one since they work for the contractor. Thus, if their actions lead to third-party injury and damage, the contractor can be liable. 

Contractors can easily prevent this by requiring subcontractors to have general or specialty contractors insurance beforehand or including them in their policy as additional insured.

Errors and Omissions Insurance 

Also called professional liability insurance, errors and omissions insurance protects contractors and subcontractors from financial losses if a client alleges they made a mistake or omission in their services that resulted in a financial loss. This insurance policy will cover legal costs and potential settlements.

The contractor’s errors and omissions policy should cover a broader range of professional services associated with the entire project, including potential mistakes made by subcontractors they hire. The policy should also address delays, missed deadlines, or failure to meet project specifications.

Workers’ Compensation Insurance 

Workers' compensation insurance is a crucial safety net for both contractors and subcontractors in the construction industry. It’s a must-have construction insurance policy that protects businesses from the financial burden of employee injuries or illnesses sustained on the job.

Although contractors and subcontractors both get the same basic benefits from workers' compensation, like medical expenses for injured workers and legal risks, the coverage can be a little different depending on the policy and state laws.

Contractors, with potentially larger workforces and higher-risk projects, might require higher coverage limits compared to a smaller subcontractor with just a few employees.

The Difference Between Contractors and Subcontractors 

Get Insurance for Contractors and Subcontractors by KASE 

The difference between contractor and subcontractor lies mainly in who hires whom and their responsibilities. Contractors hire the latter and are responsible for their actions in the workplace—damages included. That’s why adding subcontractors to contractors’ general insurance policy is recommended. This protects both parties from unforeseen financial losses. 

KASE Insurance, an award-winning insurance brokerage in Ontario, offers a wide range of coverage options, including extended protection specifically designed for subcontractors. Our team is here to discuss your specific insurance needs and explore how our comprehensive plans can safeguard your construction project and provide peace of mind.

Contact KASE Insurance today so you can approach your next construction project with the right insurance company backing you up.