View Full Version : How does Sub Contracting effect insurance
01-14-2005, 12:20 PM
Here is the situation: I have a major account for snow removal. We do the plowing and salting. I have to have the snow piles removed by a trucking firm. The trucking firm bills us for the removal and then I bill the customer. The first snowfall this season the trucking firm billed me $900.00. When I bill the customer they will be pay us. We will then pay the trucking firm. I will add a small charge to the customers bill for the processing and the over seeing of the removal. My problem is since insurance is based on total income of the business
my insurance will go up even thou most of the income I am getting for this is being given to the trucking firm. Is thier away I can hire some one to do work like this and it not hurt me? Being a lawncare service I could use other help like tree removal companies and such. thanks for reading!
01-14-2005, 12:46 PM
that's the reality of using subs. my insurer limits (and audits for) subs to being less than 25% of gross. this really sucks for my remodeling company and can be mitigated by having my subs break-out the invoices to increase the mark-up on material and decrease the labor rate.
have you looked at what % of sub labor you used last year or forecast for this year? that $900, even for a part-timer, seems such as small number that it shouldn't be a problem, or is the issue that your policy prohibits subs and you are trying to avoid a more expensive policy that allows subs? i understand that was a one time fee and you are subject to more as the snow falls, but relative to your total income, it seems negligible.
01-14-2005, 05:15 PM
Only deal with subs with proof of ins. If they do not have, then my ins. man will charge me to cover them, but if they have ins. then no charge for me.
01-14-2005, 06:26 PM
Bills is right. If you have proof of insurance covering the period of time you subed the work, and they have at least the same amount of coverage, sub work can be deducted from income for insurance pupposes. The key is to keep good records.
01-14-2005, 09:38 PM
no offense to dforbes and bills, but clarify with your agent the exact impact of using subs. even if the sub has 10m worth of coverage for your $900 snow removal, the odds are heavily against most businesses that the insurance company figures it being no problem even with comparable proof of insurance. at an absolute minimum your insurance coverage will want proof of insurance, and more than likely to be on their policy as "additionally insured". you really don't want to end up on the wrong side of an insurance audit. the punitive consequences can be expensive.
01-14-2005, 10:15 PM
tony, I apreceate your comments. by proof of insurance I mean a certificate of insurance showing how much you are insured for and any exclusions. I have been through an audit per year since I have been in business, (1994) thats ten audits. My company has always excepted this. I am sure that differant companys have diferant policys. As for as additinal insured, many big companys ask for this, I have 5 companys listed on my policy as additional insured. It adds about 10% to the premium each time. The main advantage to this is if I am sued and my policy is not enough to cover the lawsuit so the sue the company I am performing work for to, then my insurance company will furnish legal counsal for this company. I have never heard of an insurance company asking to be additional insured. They have there own lawyers. Not saying it doesn't happen just never heard of it. Your best bet is find an agent and discuss this with him. Im sure laws and rules vary state to state.
01-14-2005, 10:31 PM
If you run an accounting software program like quickbooks, just set up an income account for subcontractor costs and also set up an account as an expense for subcontractor costs. It makes keeping records really simple, and you can see exactly what percentage of your gross is coming from sub work.
01-14-2005, 11:15 PM
dforbes, i realized what you meant by proof of insurance. what i was attempting to say is make sure you receive that document from the sub.
with regard to additionally insured, i think we are saying the same thing, only separated by semantics. my insurance companies looooove for me to be added to the other's policy in order to mitigate their risk.
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