Checking a contractor's license, insurance and workers' comp (DC example)

Who carries the risk when you hire the trades yourself

Some owners act as their own general contractor to save money. One owner did exactly that in Building Permit and Workers comp and asked how to provide workers' comp for the plumber and electrician they were hiring. We saw only a search excerpt of that thread. In Hire a contractor or do it myself?, also seen only as an excerpt, a reply warns that the owner is 'not insured' to do the work and that permits often need a contractor. A third post, Do I still need builders risk insurance?, asks whether a contractor's insurance makes builder's risk unnecessary. We saw only its title, and no answers were visible.

Together those three questions cover what this article is about. Is the business allowed to do the work? Whose insurance responds if someone is hurt or something is damaged? And who insures the construction itself? The answers come from licensing records, insurance documents and your contracts, not from a contractor's assurance. We use DC as the worked example because its licensing agency publishes the rules clearly. Other jurisdictions have different agencies and requirements.

Looking up a DC contractor license and checking the class

DC's Department of Licensing and Consumer Protection (DLCP) lists 'General Contractor/Construction Manager (A, B, C, G, and H)' as a Basic Business License category. Its Business Licensing Division page points the public to BOSS (boss.dc.gov) and to the Scout tool to verify an existing license. Search the exact legal entity name on the proposal and contract. A slightly different name can be a different company. Record the license number, class, status and expiration date, and save a screenshot with the date.

The class matters as much as the status. DLCP's Mandatory Insurance Levels page (DC) sets out the classes under 17 DCMR § 3902.1. A Class A holder has no single-contract limit. Class B is limited to single contracts of $10,000,000, Class C to $5,000,000, Class G to $2,000,000 and Class H to $500,000. The same page lists minimum commercial general liability (CGL) insurance for each class. It ranges from $2,500,000 per occurrence for Class A down to $500,000 per occurrence for Class H. If a bidder's class cap is below your contract value, do not award the contract or let the bidder mobilize until it holds an appropriate active class or DLCP has confirmed in writing that it may lawfully perform the contract. Do not rely on the bidder's explanation.

Licensed trades such as electricians and plumbers are licensed separately as occupations. DLCP's Quick Services page (DC) links to 'Verify a Occupational/Professional License.' Check the individual who will pull the trade permit, not just the company name on the van.

Reading a certificate of insurance without over-reading it

DLCP's License Types Requiring Insurance page (DC) says general contractors must keep a certificate of insurance (COI) on file with DLCP. That COI lists DLCP as certificate holder and must stay in force for the license period. The insurer must be authorized in the District, and general contractor applicants need an insurer rated B+ or better by A.M. Best. The same page cautions customers that a COI 'does not automatically mean that coverage will be provided for all issues.' DLCP holding a COI tells you the contractor met a licensing condition. It does not tell you what the policy covers on your job.

Ask for a COI issued for your project, sent to you directly by the insurance agent or broker, not forwarded as a PDF by the contractor. Check the named insured against the license and contract, policy numbers, effective and expiration dates, each limit, and the description of operations. The DLCP page explains how to confirm through the NAIC State Based Systems lookup that an insurer is authorized in DC. If anything looks altered or inconsistent, call the agent listed on the certificate at a number you found independently, and ask them to confirm the policy is active.

Certificate holder versus additional insured

Being named as certificate holder usually means only that you receive a copy of the certificate. It does not make you an insured under the contractor's policy. Additional-insured status is created by an endorsement to the policy, and endorsements differ in what they cover: ongoing work, completed work, or only liability arising from the contractor's own work. Many restaurant leases require the tenant's contractors to name the landlord, and often the tenant, as additional insureds with specified limits.

Write the requirement into the construction contract: required coverages and limits, additional insureds by name, and a copy of the actual endorsement, not just a box ticked on the certificate. Do not assume a contractor carries any endorsement just because DLCP licensed them. The licensing rule requires liability coverage, not particular endorsements for your project. Have your own broker review the endorsements against the lease and the contract.

Workers' comp for every trade on site

The DC Department of Employment Services' worker rights page states that 'workers' compensation coverage is required for all private employers in the District of Columbia.' It notes exceptions such as independent contractors and unpaid volunteers. On a restaurant job, that means each trade business with employees on site should carry its own workers' comp. Ask for a comp certificate or policy confirmation from each one, and match the employer name to the business you are paying.

The risky case is the one in the owner-as-GC thread. If you hire individuals directly, set their hours and pay them as workers rather than as independent businesses, you may become their employer for comp purposes. Whether a person is an independent contractor is a legal question that depends on the facts, not on what the paperwork calls them. Another warning sign is a sub who claims to have no employees, which would mean no comp policy, and then arrives with helpers. Before work starts, talk to your insurance broker about your own policy and, if needed, to DOES. Do not wait until after an injury.

Builder's risk: insuring the work itself

A contractor's liability policy is generally designed to answer claims that the contractor injured someone or damaged someone else's property. Builder's risk is property insurance on the construction itself while it is being built. It can cover new ductwork, installed equipment and materials stored on site against perils such as fire or theft, depending on the policy form. The question in the 1cwylqb thread title, whether builder's risk is still needed if the contractor is insured, is answered by your contract and lease, not by a general rule.

Decide in writing who buys builder's risk: the owner, the GC, or the landlord's program. Also decide who is named on it, whether it covers owner-furnished equipment, and when it ends. Restaurant jobs often have expensive owner-purchased equipment delivered before opening. Make sure that equipment is covered somewhere, whether by builder's risk, your own property policy, or both, from delivery to opening day.

Hypothetical example: three bidders, three different gaps

Every name and number here is hypothetical. An owner is comparing three bids for a $620,000 DC buildout. The lease requires the landlord to be named as additional insured on contractor CGL of at least $1,000,000 per occurrence. Bidder 1's Scout record shows an active Class H license, which DLCP limits to single contracts of $500,000. The contract is $120,000 over that cap. The owner does not award the job to Bidder 1 unless, before award and mobilization, Bidder 1 holds an active class that covers $620,000, or DLCP confirms in writing that Bidder 1 may lawfully perform this contract. A pending question is not enough. Bidder 2 holds Class C, with a $5,000,000 cap. Its COI shows $500,000 per occurrence, which meets DLCP's Class C minimum but not the lease's $1,000,000, and lists the landlord only as certificate holder. The straightforward fix is for Bidder 2 to raise its primary CGL limit to $1,000,000 per occurrence. An umbrella or excess policy on top of the $500,000 primary counts only if the lease allows limits to be combined, and only after the owner's broker confirms that the umbrella attaches properly and extends additional-insured coverage to the landlord. Either way, Bidder 2 must provide the actual additional-insured endorsement before signing. Bidder 3 holds Class B, its COI meets the lease, and its CGL policy is current. But the workers' comp certificate for its drywall sub expires in week 6 of a 16-week schedule.

Each finding produces a specific condition. Bidder 1 cannot be awarded the job until a qualifying class or written DLCP confirmation is on file. Bidder 2 needs a limits fix that satisfies the lease as written, plus the endorsement. Bidder 3 needs a renewal certificate before week 6. The owner writes each condition into the award decision, the contract or the pre-mobilization checklist. The table shows what each document does and does not prove.

Recheck at every site and every renewal

Licenses expire, classes change and policies renew. A check done for one location does not carry over to the next. A multi-site operator should keep a contractor file per site and calendar every expiration date, so a lapse is caught before the contractor's crew is on site without coverage.

• License looked up by exact legal name; class compared with contract value; screenshot dated
• Trade licenses checked for the individuals pulling electrical, plumbing and gas permits
• COI requested from the agent for this project; limits compared with lease and contract
• Additional-insured endorsement copies on file, not just certificate-holder status
• Workers' comp confirmation for every trade employer on site, with expiration dates calendared
• Builder's risk responsibility, named insureds and owner-equipment coverage agreed in writing
• Renewal certificates required before any expiration date that falls during the job
• Outside DC: identify the licensing agency and comp rules for that jurisdiction before bidding