Subcontractor warranty

A subcontractor warranty is a clause in a contractor's liability policy, most often a surplus lines policy, that ties coverage for subcontracted work to steps the contractor must take. Typical requirements are a written subcontract with an indemnity clause running to the contractor, liability limits at or above a stated amount, the contractor named as additional insured, and a certificate of insurance on file before the sub starts work.

The penalty depends on the wording. Some policies treat the warranty as a condition precedent and deny the claim. Others apply a higher deductible, reduced limit or an exclusion for that subcontractor's work. Standard ISO CG 00 01 contains no such warranty, so it appears by carrier-specific endorsement or manuscript form, and it is easy to miss until a claim.

The pitfall is paperwork that looks right but is not. A certificate only reports what the sub's policy says; the warranty may call for the endorsement itself, limits that match the schedule, and coverage that does not lapse mid-job. Expired certificates and unsigned subcontracts are the usual breaches. Read the warranty before bidding, track expirations, and keep a file per sub. The guide on managing subcontractor insurance and certificates shows how to manage certificates and contracts.