At Ausure Macarthur we have been managing insurances for the security industry and SPAAL members for over 12 years.
A common question we receive from those providing manpower and electronic security is “are my sub-contractors covered?”.
If you use sub-contractors in your security business, whether they’re sole traders or companies, you need to ensure that they have their own insurances. Typically, public & products liability and workers compensation. Let’s take a look at each separately.
Public & Products Liability
Public & Products Liability policies will exclude liability of sub-contractors. You will often be covered for your vicarious liability due to the actions of sub-contractors, however the sub-contractors themselves will not be covered.
For instance, you sub-contract crowd control security services for a national hotel contract to a regional security contractor. In the event that contractor causes injury whilst evicting a patron from a venue and a claim is brought forward, the sub-contractor will not find cover under your policy. You however may find cover if you are sued as well for the actions of your sub-contractor. For you to have any liability the claimant would need to demonstrate that you have been negligent in some capacity, but this may be an allegation that you did not ensure adequate training was being carried out, or perhaps they were working to your SOPs or wearing your uniform.
Whilst some underwriters will allow you to cover sub-contractors under your liability policy, usually only if they are specifically named on the policy, it is not recommended. Whether they work for you full-time or occasionally they are their own legal entity and liable for their own negligent acts and the costs associated with protecting themselves against claims. Also, any claims against sub-contractors named on your policy will affect your claims history and ability to negotiate competitive cover going forward.
So, you should ensure that all of your sub-contractors have a Public & Products Liability insurance policy, covering the activities they will be carrying out for you. You should sight their Certificate of Currency which confirms they have paid the premium. You should also have them note you as a “Principal” or “Interested Party” on their policy. This will provide a level of protection for you under their policy, where you may be sued due to the negligent actions of your sub-contractor whilst carrying out contract services for you.
Workers Compensation
If your sub-contractor is a company, they legally must have their own workers compensation policy. This will provide cover for workplace injuries sustained by their own employees – medical costs, rehab costs and loss of wages.
If your sub-contractor is a sole trader (or partnership) it is a little more complicated. Sole traders and partnerships do not qualify for workers compensation – that is, the sole trader or partners themselves. If they have employees, they must have a policy.
In some cases you will be liable for workplace injuries of these sole trader sub-contractors and you must include them in your own workers compensation declarations. Typically, if you pay them an hourly rate, if they are paid on a weekly or fortnightly basis like other employees, if you provide them a uniform & tools, if they are required to work regular & defined hours for you, they will be considered a “worker” under the Workers Compensation Act and you must include them in your own workers compensation declarations.
To determine if contractors are deemed workers, you can use the following test: http://workerstatus.workcover.nsw.gov.au/. Note this test is for NSW workers only, however the same principles generally apply to all other states as well. Contact us about other states and their requirements.
Where sub-contractors are liable for their own policies, you would be wise to have your sub-contractors submit a Sub-Contractors Statement – effectively, a declaration that the Sub-Contractor has paid all its obligations under the Workers Compensation Act, Payroll Tax Act and Industrial Relations Act. The Principal Contractor (i.e. you) may be liable for the payment of the workers compensation insurance premiums, the payroll tax and the entitlements of the employees unless the Sub-Contractor’s Statement is provided
Of course, there may be other insurance policies for you and your sub-contractors to consider. We recommend speaking with an insurance broker who will learn your business and provide tailored advice. At Ausure Macarthur, we can do just that.
Please do not hesitate to contact us on 1300 633 530 or www.ausuremacarthur.com.au with any questions.