What is Subcontractor Public Liability Insurance?

Subcontractors play a vital role in the construction industry, delivering specialist services to projects big and small. From plumbing to electrics and plastering to bricklaying, subcontractors often operate under the Construction Industry Scheme (CIS), a government initiative designed to manage tax payments within the construction sector.

Here at Contractwise, we’re CIS payroll experts who keep contractors and subcontractors protected. We ensure CIS compliance by providing payroll audits and removing the risk of HMRC reclassification.

We also have a thorough understanding of other important elements, including public liability insurance.

In this article, we’ll take a closer look at what public liability insurance is and why it matters for subcontractors.

Read on for more…

What Is Public Liability Insurance?

Public liability insurance is a type of insurance that is designed to cover legal costs and compensation payments if your business activities have caused injury or damage to a property. In the context of construction, this could include a member of the public tripping over your equipment or accidental damage to a client’s building.

While public liability insurance isn’t a legal requirement in the UK, it is strongly recommended. Often, it is also contractually required, and many people won’t work with subcontractors who do not have this insurance in place.

Public Liability Insurance For Subcontractors

Subcontractors operate in a high-risk environment. Whether you are working on a building site, in domestic properties or on commercial developments, accidents can happen. Without insurance, the cost of the subsequent legal claims can be devastating and may even cause you to go out of business.

As a subcontractor, you’re essentially running your own business, even if you’re working under a contractor. This means that the liability for accidents caused by your actions or negligence is your responsibility unless it has explicitly been stated otherwise.

Contractors working under CIS will also often assume that subcontractors will have their own cover, especially when it comes to hiring bona fide subcontractors (we’ll explain this term in more detail later on). With this in mind, if you’re working without public liability insurance, not only will you be exposing yourself to financial risk, but you may also be risking your professional reputation.

What Does Public Liability Insurance Cover For Subcontractors?

Public liability insurance for subcontractors covers the following:

• Injury to third parties: This includes clients, members of the public and other workers who are not directly employed by you. For instance, if someone trips and falls over your tools and injures themselves, this policy will ensure you’re protected.

• Damage to third-party property: This covers you if you accidentally damage someone’s property during the course of your work, for example, smashing a window.

• Legal costs: In the event of a claim, your policy usually covers the cost of legal representation and any court expenses.

• Compensation claims: If you’re found liable, your insurance will pay out the necessary compensation to the injured party or to cover the damage caused.

Remember, this is specific to public liability. It does not include personal injury to yourself or damage to your tools. These things will require separate cover.

Why Is Public Liability Insurance Important For Subcontractors?

Public liability is essential for subcontractors for several reasons, including:

• Protects against financial loss: Accidents can result in claims worth thousands, and sometimes millions, of pounds. Without insurance, you will be personally liable for the payments.

• Meets contractor requirements: Many contractors require proof of public liability insurance before allowing subcontractors on-site. Without it, many people will refuse to work with you.

• Credibility: Having insurance demonstrates your professionalism and reassures contractors of your credibility.

• Peace of mind: Knowing that you’re protected allows you to focus on your work rather than having to worry about the potential legal and financial consequences.

• Compliance with industry norms: Especially when working under CIS, being appropriately insured is the industry standard. It also helps avoid disputes about who is liable in the event of an incident.

Bona fide subcontractors meaning

The term bona fide subcontractor refers to an independent subcontractor who works under their own direction, provides their own tools and materials and carries their own insurance. Generally speaking, these subcontractors are specialists in a specific field such as:

• Plumbers

• Groundworkers

• Electricians

• Plasterers

• Stonemasons

• Engineers

• Carpenters

• And more

This is in contrast to labour-only subcontractors who are hired to work under the direction of the main contractor. These subcontractors will use tools and materials provided by the contractor.

It is important to know the differences between these two subcontractors because liability changes depending on the type of subcontractor. Contractors are generally responsible for labour-only subcontractors, meaning they will be responsible for ensuring insurance covers those individuals. In contrast, bona fide subcontractors are responsible for their own public liability cover.

So, if you’re a bona fide subcontractor under CIS, don’t assume you will be covered under your contractor’s insurance. This will likely not be the case.

Final Thoughts

In the fast-moving world of construction, taking shortcuts on insurance is never worth the risk. For subcontractors, especially those registered under the Construction Industry Scheme, public liability insurance is essential protection against accidents and costly legal claims.

Understanding whether you’re a bona fide or labour-only subcontractor is crucial, as it directly impacts your liability and your insurance responsibilities. If you’re working independently, with your own tools, schedule and under your own steam, the onus is on you to make sure you are correctly insured.

At Contractwise, we help contractors and subcontractors with every aspect of their CIS obligations. If you’re unsure about your responsibilities or want further support as a contractor or subcontractor, we’re here to help. Get in touch with our team today to explore our range of services and find out more.