There are two reasons why you want to collect certificates of insurance on your subs. The first is because you want to protect your own loss record under both your Work Comp and General Liability. The best way to protect your own loss record is to make sure that all of your subs carry their own policies and present you with a certificate of insurance as evidence. If your sub carries his own policy, his policy will most likely pay the claim in full. The second reason is because if you can’t provide the auditor with a valid certificate of insurance that was effective during the dates that the sub performed work for you, you’ll be charged on audit for both Work Comp and General Liability as if the sub were your employee.
At a minimum, the certificate should indicate that the sub carries both Work Comp and General Liability. It’s also prudent for the sub to carry sufficient auto insurance on his vehicles. Its possible for the builder to be drawn into the lawsuit if the sub is involved in an at fault accident while working on behalf of the builder.
General Liability certificates of insurance should be kept on file for at least the period of the statute of repose in your state. The statute of repose is the deadline for a home owner to file a lawsuit for property damage such as construction defect against the builder. In such cases, the builder will look to the sub’s General Liability policy for protection. In South Carolina, the statute of repose period is 8 years if the certificate of occupancy was issued after July 1 of 2005 or 13 years if the certificate of occupancy was issued before this date.