Checking the insurance details of contractors that are undertaking work for you, whether in your private life or in your business life is an essential part of ensuring that they are properly protected in respect of the work they are doing and as such that your interests are also protected.
People in the United Kingdom have a tendency to be slightly reserved when asking for information from others that they feel may in some way insult them or questions their credibility. This doesn’t really have a place when the downside of not asking the questions and getting the right answers could cost you a considerable amount of money.
Professional contractors expect to be asked about their insurance arrangements and should be willing to provide you with the information you need very quickly. It gives you both peace of mind and demonstrates the contractors professionalism.
What insurance should a contractor have?
This depends on the type and nature of the work that they undertake for you and others. Here we will concern ourselves with the public liability and professional indemnity policies and their relevance to you.
Lets have a quick look at what these policies cover;
Public Liability Insurance
Protects the policyholder, the contractor, in respect of his legal liability for personal injury or property damage arising from their business. Note that these policies do not cover damage to the “works” themselves.
Professional indemnity Insurance
Protects the policyholder in respect of their legal liability for loss arising from the professional risk i.e. advice, design, their professional services that you pay for. This is relevant when you are buying a professional service in for example accountancy or insurance broking!i
What happens if a contractor has no insurance?
This is the interesting part, if a contractor does not have the appropriate insurance this in no way affects whether or not he is legally liable for any damage or injury. It simply means that he has no insurance in place to protect him. In the contractor is a man of means or a larger company you will still be able to enforce your legal rights against him, but if he is “man of straw” then taking any action against him for an amount of money he cannot afford to pay is almost pointless and can just be an expensive pyrrhic victory on your part.
What information do I need to check for in a contractor’s insurance?
You need to confirm with the contractor;
- the business description on the policy, does the work you are having undertaken fall within this
- who the insurance is arranged with
- that the policy is in force and current, look for the renewal date as this may expire during the works
- the limit of indemnity, this is the maximum amount the insurer will pay
Ideally you would like to see the policy schedule or some other independent verification from the contractor, such as a so called “To whom it may concern” letter from an insurance broker detailing the contractors insurance arrangements.
How can I check the contractor’s insurance details authentic?
If you are in any doubt of the authenticity of any document, you can always check this with the insurer, either directly or via your insurance broker. We see regularly see examples of false documents provided to clients, either complete fabrications or ones that have been changed in one way or another.
Who should check a contractors insurance details?
The importance for a contractor to be correctly and adequately insured is equally vital to both other contractors and the people or businesses that hire them. For the contractor it is in their interests when hiring bona-fide subcontractors to make sure that there own insurance arrangements are not unnecessarily exposed to claims and for those that employ contractors to undertake work directly, they need to be assured that there interests are protected.
Should I use a contractor who has no insurance?
This is entirely your own decision of course and sometimes a “cheap quote” can be tempting, but it could end up costing you a lot more in the long run.
From a business to business perspective, if you have a contractors liability insurance policy, not checking the details of a contractors insurance could invalidate your own insurance in respect of a claim.
If you would like any more information on this subject or have any queries or comments to make, please contact us directly.