A contractor is reviewing insurance certificates from subcontractors. The certificate shows general liability coverage of $500,000 per occurrence. The contract requires $1,000,000. What should the contractor do?
Correct Answer
A) Require the subcontractor to increase coverage before starting work
Insurance requirements in contracts are mandatory minimums for risk management. The subcontractor must obtain adequate coverage before beginning work to ensure proper protection for all parties.
Why This Is the Correct Answer
Insurance requirements specified in construction contracts are legally binding minimum coverage amounts that must be met before work begins. The contractor has a duty to verify that all subcontractors carry adequate insurance to protect against potential claims and liabilities. Allowing work to proceed with insufficient coverage exposes all parties to significant financial risk and potential legal liability. The subcontractor must increase their coverage to the contractually required $1,000,000 before any work can commence.
Why the Other Options Are Wrong
Option B: Purchase additional coverage for the subcontractor
The contractor is not responsible for purchasing insurance coverage for subcontractors - this would create additional liability and cost burden that should remain with the subcontractor per the contract terms.
Option C: Reduce the contract amount proportionally
Accepting inadequate insurance coverage violates the contract terms and exposes the contractor, property owner, and project to significant financial risk if claims exceed the subcontractor's coverage limits.
Memory Technique
Think 'No Coverage, No Work' - insurance must meet contract minimums before any work can begin
Reference Hint
Florida Building Code - Chapter 1, Administrative provisions regarding contractor responsibilities and insurance requirements
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