A sub has no insurance and you already owe them
The sub's certificate of insurance expired or never came in, and the invoice is on your desk.
Whether you must pay is a contract question for an attorney. The company can control the step before it, which is who receives and checks the sub's COI and W-9 before the sub starts, and who tracks when each COI expires. The task goes to whoever fits the company: office administration, the office manager, a compliance manager, the bookkeeper or someone else. It's ongoing, and a lapse costs you. In a company with the work assigned, the accounting team pays an invoice when the money comes in and the sub has a current COI and W-9.
Three moves, in order
Step 08: Standards and accountability
Five hours a month of owner time, spent projecting the work.
Other problems step 08 solves
Other things that go wrong
What owners ask
Do I have to pay an uninsured subcontractor?
The sub's certificate of insurance expired or never came in, and the invoice is on your desk. Whether you must pay is a contract question for an attorney. The company can control the step before it, which is who receives and checks the sub's COI and W-9 before the sub starts, and who tracks when each COI expires. The task goes to whoever fits the company: office administration, the office manager, a compliance manager, the bookkeeper or someone else. It's ongoing, and a lapse costs you. In a company with the work assigned, the accounting team pays an invoice when the money comes in and the sub has a current COI and W-9.
Which part of the system fixes this?
The step is number 08, standards and accountability. Five hours a month of owner time, spent projecting the work. It's drawn from chapter 8 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Pick the one person who receives and checks every sub's COI and W-9 before the sub starts.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 08 depends on step 03, overhead calculation and step 06, project management and step 07, monthly cadence. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.