Don’t put your business at risk. We protect your company by ensuring all of your subcontractors are properly licensed and insured!
Subcontractor Licensing Made Easy
If you subcontract installation or service, it is vital that you have a good subcontractor compliance program in place. Hiring an unlicensed subcontractor puts your company and your licenses at risk and can result in significant fines. It also creates significant liabilities if something goes wrong with a job. If you invest the time and resources to ensure your company is properly licensed and compliant, but use subcontractors who are not, then you are putting your own licenses at risk.
Do you know which licenses your subs need?
Do you know if their licenses and insurance are current?
Avoid fines and protect your company by ensuring that all subcontractors are properly licensed and insured. Aiding and abetting an unlicensed contractor can result in severe disciplinary actions, including revocation of your license.
CMS can manage your subcontractor approval process or help you develop and implement your own subcontractor compliance program.
Best Practices to Follow for Subcontractor Licensing
Know the licensing requirements for your subcontractors. The licensing requirements for the installation company will often differ from the company that sold the system. For instance, if you sell and monitor alarm systems but subcontract your installation and service, in many states you don’t have to hold a state license, but the installation company does. It’s important, therefore, that you understand the licensing requirements for your company as well as your subcontractors. Also keep in mind that certain states, like Louisiana, prohibit subcontracting alarm installation and service to individual contractors. You are only permitted to subcontract to other companies, who must of course be properly licensed.
Be sure that you have insurance requirements in place for your subcontractors. Consult with your insurance company regarding the appropriate minimum coverage amounts and other requirements for risk mitigation. Normally insurance companies will suggest that your company be included as additional insured with respect to your sub’s general liability coverage. They may also suggest that this be provided on a primary/non-contributory status, meaning that the sub’s insurer is prevented from seeking its equitable or contractual independent right of recovery from your insurer. In other words, your sub’s insurance will pay first; your insurance will pay only what is in excess of the subcontractor’s coverage limits.
You should have a written agreement, vetted by an attorney, with each of your subcontractors that defines the nature and terms of your business relationship. The agreement should include information about your insurance and licensing requirements and require the subcontractor to provide updated certificates of insurance and licenses prior to expiration. Failure or refusal to provide evidence of required licenses or insurance should be grounds for default and the contractor should not be allowed to perform installs or service until it is remedied.
Approved Contractor List
Subcontractors who have signed the subcontractor agreement and provided proof of the required licensing and insurance should be added to an Approved Subcontractor list. This list should be available to the installation and service department. When subcontracting work to outside companies, they should be prohibited from using any companies that have not been vetted and added to the list.
It is helpful to create a Subcontractor Approval Package that contains instructions for becoming an approved subcontractor for your company. It should include your subcontractor agreement and the process for providing proof of insurance and licensing.
It is critical to track the expiration dates for any licenses and insurance required for your subcontractors. If a subcontractor fails to renew a license or insurance, they should be removed from the approved subcontractor list until proof of the renewal is provided. Continuing to subcontract work to a company whose license or insurance has lapsed will put your company and licenses at risk.
Maintaining a subcontractor licensing compliance program can be time-consuming and many companies lack the internal resources or knowledge for proper administration.
CMS can help by providing the licensing requirements, developing, and distributing the Subcontractor Approval Package, reviewing the documents provided by prospective subcontractors and managing the Approved Contractor List.