Your reputation depends on taking responsibility for everything that happens on your jobsites. This is your obligation under your contract and under the law. But there are protections that you can build into your subcontracts so that the ultimate responsibility for your subs’ negligence or faulty workmanship is shouldered by them.
Big commercial projects use a cascading contract structure that assures protections down the line. The owner/general contract defines the indemnity and insurance obligations owed by the general to the owner (basically for everything that happens on the job). In the subcontracts, the general requires the subs to cover the indemnity and insurance obligations the general has promised to the owner for the subs’ work. The sub-subcontractors promise those same things to the subs, and so on down the line. If the project is damaged or delayed as a result of a sub-subcontractor’s negligence or faulty work, the owner doesn’t have to chase down the sub-subcontractor for relief; he needs only to go to the general.
Your general contract with the client should define your obligations and the limits of your responsibility in regard to unforeseen conditions, code and easement variances, and damages or delays caused by the owner or other contractors hired by the owner. That contract defines the limits of your indemnity and insurance obligations to the owner, but it should never try to shift those obligations from you to your subs (any attempt to do so is not only bad business, it would likely be thrown out by a court). Basically, your general contract provides that you are responsible for anything that happens on the jobsite as a result of your and your subcontractors’ actions.
While it’s good for your reputation to accept responsibility for everything that happens on site, you can protect your company from shouldering all that responsibility by obligating your subs to indemnify and insure your company for any of their actions on the site. In sum, your client should know that you are going to step up and take care of them and their home. And your subs should know that you are going to hold them responsible for everything they do on your sites.
—Attorney Richard Feeley is president of Feeley Mediation & Business Law (feeleymediationbusinesslaw.com), providing strategic legal solutions to remodelers.