Contracts & risk transfer
The subcontractor agreement is an insurance document.
≈ 3 MIN READ
If you hire subcontractors on a handshake, every one of their mistakes is potentially your claim, your loss history, and your premium. A written subcontractor agreement is how risk gets moved to the party who created it. That's what risk transfer means — and proper risk transfer protects the business.
What happens without one
A sub's employee gets hurt, or a sub's work damages the project or a third party. With no agreement in place, the injured party sues everyone — and as the general contractor or hiring business, you're the deepest pocket standing closest to the loss. Your general liability policy responds, your loss runs absorb the claim, and your pricing carries it for years. Meanwhile, at audit, subcontractor costs without certificates of insurance can be charged into your own exposure — meaning you literally pay premium for the sub's risk.
The four working parts
A solid subcontractor agreement does four insurance jobs at once:
- Indemnification / hold harmless — the sub agrees to be financially responsible for losses arising from their own work. This is the spine of the document.
- Insurance requirements — the sub must carry their own coverage (GL, workers comp, auto, and umbrella as appropriate) at limits that fit the job, so there's real money behind the indemnity promise.
- Additional insured status — your business is added to the sub's liability policy by endorsement, putting their carrier in front of yours when their work causes a loss.
- Waiver of subrogation — the sub's carrier agrees not to come back at you to recover what it paid.
Paper it before the work starts
The agreement only works alongside its evidence. Before a sub sets foot on the job: collect a certificate of insurance, confirm the additional insured endorsement actually exists (the certificate alone isn't the coverage — more on that here), check the dates and limits, and keep it all on file. At audit time, those certificates are also the difference between sub costs being accepted as insured — or charged like payroll.
Make it routine, not heroic
None of this requires drama. One signed master agreement per sub, refreshed certificates at each renewal, and a simple tracking habit. We help clients set up exactly this routine — and our intake asks about it, because underwriters price businesses with disciplined risk transfer differently than businesses without it. Have your attorney draft or review the agreement itself; we'll make sure the insurance requirements inside it match how your program is actually built.
This article is general information, not legal advice and not advice about your specific situation. Have contracts drafted and reviewed by a qualified attorney.