Here's what most plumbing contractors don't realize until it's too late: hiring a subcontractor without the right insurance documentation is like handing someone the keys to your business and hoping they don't crash it. When that subcontractor's employee gets hurt, or when their work causes $50,000 in water damage to a client's home, guess who the property owner is going to sue? You. And if your subcontractor doesn't have proper insurance—or if you're not listed correctly on their policies—you could be personally on the hook for every penny.
The good news? Protecting yourself isn't complicated. It just requires understanding four critical components: certificate tracking, additional insured endorsements, waiver of subrogation clauses, and workers' compensation verification. Let's break down exactly what you need to require from every subcontractor you hire.
Why Certificates of Insurance Aren't Enough
Most contractors think getting a Certificate of Insurance (COI) from their subcontractors means they're protected. That's dangerous thinking. A COI is essentially just a fancy receipt that says "yes, this person has insurance." It doesn't grant you any coverage whatsoever. Think of it like someone showing you a photo of their driver's license—it proves they have one, but it doesn't let you drive their car.
The real protection comes from the endorsement—the actual policy document that lists you as an additional insured. According to industry experts, there are dozens of different additional insured endorsement forms available, and each provides different types of coverage. Some only cover you during ongoing operations. Others extend to completed operations, which is crucial for plumbing work where a leak might not show up until months after the job is done.
Here's what you need to do: Before any subcontractor starts work, require them to furnish you with both a current COI and a certified copy of the actual additional insured endorsement. The endorsement should show your company name, the policy numbers, coverage limits, and expiration dates. File these documents and set calendar reminders for 30 days before the policies expire. If a subcontractor's insurance lapses mid-project, you need to know immediately so you can stop work until it's renewed.
Minimum Coverage Requirements for Plumbing Subcontractors
Not all insurance policies are created equal, and minimum requirements vary based on the risk level of the work. For plumbing subcontractors, you're dealing with one of the highest-risk trades in construction. A single mistake—like a poorly soldered pipe or a failed water heater installation—can cause tens of thousands of dollars in water damage before anyone even notices.
Industry standards suggest requiring a minimum of $1 million per occurrence and $2 million aggregate for general liability insurance. However, many experienced general contractors now require $2 million per occurrence for high-risk trades like plumbing because mistakes can escalate so quickly. If your subcontractor is working on commercial projects or high-value residential properties, consider requiring even higher limits—sometimes $3 million or more.
Beyond general liability, you also need to verify workers' compensation coverage. Most states require plumbing businesses to carry workers' comp once they hire their first employee. In New York, coverage is mandatory with just one part-time worker, while Florida allows plumbing contractors to hire up to four employees before requiring it. Don't assume your subcontractor has it—verify it. If their employee gets hurt on your job site and they don't have workers' comp, their insurance company could come after you to recover the costs.
Understanding Additional Insured Endorsements
Being listed as an additional insured on your subcontractor's general liability policy is non-negotiable. This endorsement extends the subcontractor's coverage to protect you if someone gets injured or property gets damaged because of their work. Without it, you're relying entirely on your own insurance, which means higher premiums and potential coverage gaps.
Many subcontractors now have "blanket additional insured" coverage built into their policies. This sounds great, but there's a catch: it only applies if your written contract specifically requires it. If you hire someone with a handshake deal or a casual email exchange, you might not be covered. Always use a written subcontractor agreement that explicitly states you must be named as an additional insured.
Pay close attention to whether the endorsement covers ongoing operations only or includes completed operations. For plumbing work, completed operations coverage is essential. A pipe that seems fine during your final walkthrough might develop a slow leak three months later, flooding the client's basement. If the endorsement doesn't cover completed operations, you're not protected when that lawsuit arrives.
Why You Need a Waiver of Subrogation
Here's a scenario that catches contractors off guard: Your subcontractor's employee trips over some debris on your job site and breaks their leg. The subcontractor's workers' comp insurance pays out $75,000 for medical bills and lost wages. Then, six months later, you get served with a lawsuit—not from the injured worker, but from the insurance company. They're using a legal right called subrogation to sue you for the $75,000 they paid out, claiming it was your fault the worker got hurt.
A waiver of subrogation endorsement prevents this nightmare. When your subcontractor adds this endorsement to their workers' compensation policy, their insurance company agrees to waive its right to come after you for recovery. It's an additional premium for the subcontractor—typically a small percentage increase—but it's worth requiring in your contracts.
Important caveat: Some states have banned or restricted waiver of subrogation clauses. New Hampshire, Kansas, Kentucky, New Jersey, and Missouri have declared these waivers contrary to public policy in certain situations, particularly for construction risks. Before requiring this endorsement, check your state's regulations or consult with your insurance agent to make sure it's enforceable where you work.
Creating Your Subcontractor Insurance Requirements Checklist
Now that you understand what coverage you need, let's talk about enforcement. The best insurance requirements in the world don't help if you're not actually verifying compliance. Create a standardized process for every subcontractor you hire, starting before they ever set foot on a job site.
First, include your insurance requirements directly in your written subcontractor agreement. Specify the minimum coverage amounts, require additional insured status with both ongoing and completed operations coverage, and mandate a waiver of subrogation on the workers' comp policy (unless your state prohibits it). Make it clear that work cannot begin until you receive and approve all required documentation.
Second, create a tracking system for insurance certificates and endorsements. This can be as simple as a spreadsheet with expiration dates and calendar reminders, or you can use specialized certificate tracking software. The key is having a system that alerts you before coverage lapses. When a subcontractor's policy is about to expire, reach out 30 days in advance to request updated documentation. If they don't renew their coverage, they don't work on your projects—period.
Third, don't just glance at the documents—actually read them. Verify that your company name is spelled correctly on the additional insured endorsement. Check that the coverage limits meet your requirements. Make sure the policy periods align with your project timeline. Look for any exclusions that might leave you exposed. If something doesn't look right, contact the subcontractor's insurance agent directly to clarify.
How to Get Started Protecting Your Business
If you're already working with subcontractors and haven't been enforcing these requirements, don't panic—but do act quickly. Start by reviewing your current subcontractor relationships and requesting updated insurance documentation from everyone currently working on your projects. Use this as an opportunity to update your subcontractor agreements with clear insurance requirements moving forward.
Talk to your commercial insurance agent about your subcontractor insurance requirements. They can review your proposed requirements to make sure they're adequate for your risk exposure and help you understand what your own general liability policy does and doesn't cover when it comes to subcontractor work. Many agents can also provide sample contract language for insurance requirements, saving you the cost of having an attorney draft it from scratch.
Finally, remember that insurance requirements aren't just about protecting yourself—they're also about protecting your clients and ensuring that everyone on your job sites is properly covered. A subcontractor who balks at providing proper insurance documentation is a subcontractor you don't want to work with. The professionals who take their businesses seriously will have all the right coverage in place and won't hesitate to provide proof. Your reputation and your financial security are too valuable to risk on someone who cuts corners on insurance.
