Liability
The subcontractor gap
Labour-only or bona fide changes who insures the work, and getting the classification wrong voids the assumption underneath your premium.
Ayesha Karim
4 minute read
Liability policies distinguish between labour-only subcontractors, who work under your direction with your materials and are treated broadly as employees, and bona fide subcontractors, who carry their own insurance and their own responsibility for the work.
Why the classification bites
The premium is rated on the split you declared. Declare a workforce as bona fide, pay the lower rate, and then direct them like employees, and an insurer investigating a claim will rate the risk it actually carried rather than the one it quoted for.
The practical control is simple and rarely done: collect a current certificate of insurance from every bona fide subcontractor, check the limit is at least equal to yours, and keep the certificate for as long as the work could give rise to a claim, which is longer than most people keep anything.
At a glance
Class: Liability
The distinction is not paperwork. It decides whose policy responds when the work goes wrong.
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