When a subcontractor's insurance lapses in the middle of a project

A certificate is a snapshot

The certificate you collected before the job started was true on the day it was issued. Policies expire at renewal, and they can be cancelled for non-payment in between. Nothing about the certificate in your file changes when that happens.

That is why lapses are among the most common insurance gaps on a project. The subcontractor is still on site, the certificate in your file still shows coverage, and the policy behind it no longer exists.

Expired versus cancelled

Expired means the policy reached the end of its term and wasn't renewed, or was renewed but you never received the new certificate. You can see this one coming: the expiry date is on the certificate.

Cancelled means the policy ended early, most often for non-payment of premium. You usually can't see this one coming. Under current ACORD 25 wording, notice of cancellation "will be delivered in accordance with the policy provisions", which may mean no notice to the certificate holder at all (Risk Management magazine).

Who carries the risk during the gap

Injuries to the subcontractor's workers

This is the costliest gap. In most states, if a subcontractor has no workers' compensation coverage, the general contractor becomes responsible for benefits to that subcontractor's injured employees as their "statutory employer". One industry review counted 44 states and the District of Columbia with this rule. The premium for those workers can also be charged to the general contractor at its own workers' compensation audit, whether or not anyone is hurt (Insurance Journal).

Damage and injuries caused by the subcontractor's work

If the subcontractor's general liability policy has lapsed, there may be no policy to respond for its work during the gap. Claims tend to land on the next insured party up the chain, which is often you and your policy.

Work completed during the gap

General liability policies generally respond to injury or damage that happens during the policy period. Work done while uninsured can produce a claim long after the job ends, with no subcontractor policy that was in force when the work was done. This is one reason completed operations requirements matter.

How to find out early

1. Track every expiry date, for every coverage, for every subcontractor. Calendar reminders work for a handful of vendors and break down quickly beyond that.
2. Ask for the renewal certificate before expiry, not after. Thirty days ahead is a common standard.
3. Require notice in your subcontract. Since the certificate no longer promises notice, require the subcontractor to tell you of any cancellation, or require an endorsement that obligates the insurer to notify you.
4. Recheck at payment time. Tying each pay application to current certificates is one of the most effective controls, and your contract can make it a condition of payment.
5. Confirm workers' comp directly if anything looks wrong. Many states publish online coverage lookups.

The day you learn about a lapse

1. Confirm it. Call the subcontractor's broker and ask for the current status of each policy, in writing.
2. Document the dates: when coverage ended, when you learned of it, and who was on site.
3. Use your contract. Most subcontracts let you stop the subcontractor's work, hold payment, or buy the insurance and charge it back until proof of coverage arrives. Your attorney can tell you what yours permits.
4. Tell your own broker. Your insurers may need to know, and your broker can advise on exposure during the gap.
5. Get proof before work restarts: a current certificate from the broker, with the endorsements your contract requires.

Where Certgio fits

Certgio tracks the expiry dates on every certificate it checks and reminds you at 60, 30, 15 and 7 days before a policy lapses. It can send renewal reminders to your subcontractors, and checks the renewed certificate against your requirements when it comes back.

Certgio works from certificates. It can't see a cancellation that no one reports, which is why notice requirements in your subcontract still matter.

Check a certificate against your requirements, free, no account needed

This guide is general information about subcontractor insurance in the United States. It is not legal or insurance advice. Statutory employer rules, notice requirements and your rights under a subcontract vary by state and by contract: confirm the details with your broker and your attorney.