The Florida Contractor's Guide to Subcontractor Compliance

The Lowdown: What You Need to Collect, Verify, and What to Do When Coverage Falls Through

Quick Reference: Subcontractor Compliance Checklist

Use this for every sub before you let them on the job.

Documents You Need to Collect from Every Sub

• [ ] Certificate of Insurance (COI) — GL, WC, Auto if they're driving to site
• [ ] Policy Endorsements / Schedule of Forms — double check for exclusions
• [ ] Workers' Comp Proof — Current COI or verified exemption
• [ ] W-9 Form — Signed copy with valid EIN
• [ ] Contractor License — Copy with license number
• [ ] E-Verify Affidavit — Signed certification of compliance
• [ ] Signed Subcontractor Agreement

Insurance Requirements (Make Sure They're Right on the COI)

• [ ] GL Limits: $1,000,000 per occurrence / $2,000,000 aggregate
• [ ] WC Limits: Statutory minimum (or valid exemption on file)
• [ ] Auto Limits: $1,000,000 CSL (if bringing vehicles to site)
• [ ] Additional Insured for Ongoing AND Completed Operations (Forms CG 20 10 & CG 20 37 or equivalent—don't accept just one)
• [ ] Waiver of Subrogation included (GL and WC)
• [ ] Policy dates cover the whole project duration
• [ ] No CG 22 94 (Subcontractor Work Exclusion)
• [ ] No Residential Exclusion (if this is a residential project)
• [ ] No Action Over Exclusion

Verification Steps

• [ ] Sunbiz.org — Entity status is "Active"
• [ ] Sunbiz.org — Signer is listed as officer/manager
• [ ] myfloridalicense.com — License is active, clean record
• [ ] apps.fldfs.com/wcexempt — WC exemption verified (if claimed)
• [ ] W-9 name matches Sunbiz and insurance documents
• [ ] E-Verify affidavit signed and on file
• [ ] WC class codes match actual work being performed
• [ ] Payroll estimate is realistic for crew size

Before You Release Payment

• [ ] All documents current and on file
• [ ] No coverage gaps or expirations
• [ ] Work complete and up to contract spec

You Know the Story—A Good Sub is a Rare Breed

As a general contractor, you've probably had a sub who was like a breath of fresh air: shows up on time, does great work, doesn't need babysitting. But here's the thing—you have no idea if their insurance is actually good to go.

In Florida, that's not just sloppy paperwork. It's a liability time bomb.

If your sub's employee gets hurt on your site and their Workers' Comp policy is cancelled, lapsed, or fraudulent? You're the one holding the bag. Florida's "statutory employer" doctrine means you become the insurer of last resort. One non-compliant sub can turn a profitable project into a nightmare.

This guide breaks down what you need to collect from every sub, how to verify it's real, and what to do when things go south.

The Compliance Packet: What Every Sub Needs to Bring

Before any sub sets foot on your job site, you need these documents in hand. No exceptions.

1. Certificate of Insurance (COI)—Just a Starting Point

The COI is a snapshot of where things were on the day it was issued—not where they are now. It confirms coverage existed, but nothing more.

What to look for:

• General Liability (GL): $1M per occurrence / $2M aggregate—this is the industry standard, though your project might require more
• Workers' Compensation: Statutory limits (if they have any employees)
• Commercial Auto: $1M combined single limit (if they're bringing vehicles to site)
• Your company listed as Additional Insured on GL and Auto
• Your company listed for Waiver of Subrogation on GL and WC
• Certificate holder: Should be your company name and address

Red flags:

• Certificate more than 30 days old
• Limits don't match what your contract requires
• Missing Additional Insured or Waiver of Sub endorsements
• Policy expires before the project ends

The "Poison Pill" Exclusions (Don't Skip This)

Here's the dirty secret: a COI can show $1M in GL coverage, but the actual policy might exclude exactly the situations you need it for. The exclusions hide in the policy endorsements.

Request the Schedule of Forms and Endorsements and specifically check for:

• CG 22 94 (Exclusion—Damage to Work Performed by Subcontractors): This is the "widow-maker." It removes coverage for damage caused by sub work. If your sub's bad flashing causes water damage to the drywall and floors, this exclusion means the policy pays $0. Common in cheap policies.
• Residential Exclusion: Many GL policies exclude multi-family, townhomes, or tract housing. If you're building condos and your sub has this exclusion, they're effectively uninsured for your project.
• Action Over Exclusion: This one's sneaky. If a sub's employee gets hurt and collects Workers' Comp, they can still sue YOU (the GC) for negligence. Normally, the sub's GL would defend you via the Additional Insured provision. An Action Over Exclusion blocks that—leaving you to pay your own defense.

Bottom line: If a sub can't provide endorsement copies, or you spot any of these exclusions, their policy may be worthless for your purposes.

The Additional Insured Gap You Need to Know About

Most standard Additional Insured endorsements (CG 20 10) only cover ongoing operations—while the sub is actually on the job. Once they leave, that coverage stops.

Here's the problem: if a window leaks six months after the sub left, you have zero coverage unless you also have "Completed Operations" status.

The fix: Require both CG 20 10 (ongoing) AND CG 20 37 (completed operations), or an equivalent combined form. Don't accept just one.

2. Workers' Compensation Proof (or Valid Exemption)

This is where most problems hide.

If they have employees: Require a current WC Certificate of Insurance. Verify it's active—don't just take their word for it.

If they claim exemption: Florida allows certain corporate officers to exempt themselves from WC coverage. But here's the catch: the exemption only covers the person named on the certificate. If that "one-man shop" shows up with a helper, that helper is your uninsured liability.

How to verify a WC exemption:

Go to: apps.fldfs.com/wcexempt/

Search by business name or individual name

Confirm the exemption is Active and hasn't expired

Note who is covered (usually just the owner)

Critical rule: If an "exempt" sub brings anyone else to the site—family member, friend, day laborer—that person is NOT covered. Your options: send them home, or accept that you're self-insuring their injuries.

3. W-9 Form

You need this for 1099 reporting, but it's also a verification tool.

Cross-check the W-9 against:

• Sunbiz.org (Florida Division of Corporations)
• The name on their insurance certificates
• The name on their contractor license

What you're looking for:

• Business name matches across all documents
• EIN (Tax ID) is valid
• Entity status on Sunbiz is "Active" (not Dissolved, Inactive, or Revoked)
• The person signing is actually an officer of the company

Red flag: The signer on the W-9 isn't listed as an officer on Sunbiz. This could indicate a shell company or someone who doesn't have authority to bind the business.

4. Copy of Contractor License

For licensed trades (electrical, plumbing, HVAC, roofing, general contracting), verify the license is active.

How to verify:

Go to: myfloridalicense.com

Search by license number or business name

Confirm status is "Active"

Check for any complaints or disciplinary actions

Document: License number, expiration date, and the qualifier name (the person who holds the license).

5. Signed Subcontractor Agreement

A handshake deal leaves you exposed. Your subcontractor agreement should include:

• Scope of work and payment terms
• Insurance requirements (with specific limits)
• Indemnification language with a monetary cap of at least $1,000,000 per occurrence (F.S. § 725.06 requires this to be enforceable—consult your attorney on proper drafting)
• Requirement to maintain insurance throughout the project
• Your right to withhold payment for compliance failures

6. E-Verify Affidavit

Florida law (F.S. § 448.095) requires private employers with 25+ employees to use E-Verify. But here's why you should require it from all subs regardless of size: if your sub gets caught employing unauthorized workers, and you didn't do due diligence, your license could be at risk.

What to require:

• Signed affidavit stating they use E-Verify (or are exempt due to size)
• Certification that they don't employ unauthorized workers
• Agreement that they'll require the same from their subs

Spotting Shell Companies and Bogus Coverage

Florida has a real problem with Workers' Comp fraud. The scheme works like this: a "facilitator" sets up a shell company, buys a minimum policy claiming one employee and $15,000 in payroll, then "rents" that certificate to multiple crews who are actually uninsured.

When an accident happens, the policy pays nothing—and the GC is left holding the bag.

Warning signs:

• Generic company name: "J&M Construction Services of Florida, LLC" is vague enough to work for any trade. Legitimate businesses usually brand their specialty.
• Brand new company: Check Sunbiz formation date. If the company was formed weeks before your project started, dig deeper.
• Residential or virtual office address: Legitimate contractors typically have yards or commercial space, not PO boxes.
• Low WC payroll estimate: If you request their Declarations Page and it shows an estimated annual payroll of $20,000, but they have 10 guys on site, the math doesn't work.
• Mismatched WC class codes: A roofer using a "Janitorial" class code is paying a fraction of the correct premium. This is fraud, and when claims come in, the policy won't pay.
• Refusal of electronic payment: Shell companies often can't open commercial bank accounts. They need paper checks to cash at check-cashing stores.
• Check cashing endorsements: If their cancelled checks are stamped by a Money Service Business instead of a bank, that's a major red flag.

What Happens When Coverage Lapses?

Here's the question every GC asks: Can I withhold payment if my sub's insurance lapses?

Short answer: Yes—if your contract supports it.

Florida's Prompt Payment laws (F.S. § 715.12 for private projects, F.S. § 218.735 for public) require timely payment, but they allow withholding when there's a "bona fide dispute." A sub failing to maintain required insurance is a material breach of your contract (assuming your contract requires it).

How much can you withhold?

• Public projects: The statute allows withholding up to 150% of the estimated cost to cure the breach.
• Private projects: The standard is "reasonable" costs related to the breach.

Practical steps when you discover a lapse:

Stop work immediately. An uninsured sub on site is unacceptable risk.

Send written notice. Cite the specific contract clause requiring insurance and notify them they're in breach.

Withhold payment. Your notice should state that payment is being withheld pending proof of coverage, in accordance with your contract and Florida's bona fide dispute provisions.

Document everything. Keep records of when you discovered the lapse, what notice you sent, and what response you received.

Set a cure deadline. Give them a reasonable timeframe (48-72 hours) to provide proof of renewed coverage.

Important: Don't over-withhold. If you're disputing a $500 lapse issue and withholding $50,000, that can be seen as bad faith and may expose you to interest penalties. Keep it reasonable.

Setting Up a System That Works

Collecting documents at the start of a project isn't enough. Insurance can lapse mid-project, and you won't know unless you're tracking it.

Build a tracking system:

• Log every sub's COI expiration dates
• Set alerts 30 days before expiration
• Lock vendor payments when coverage lapses
• Require updated COIs before processing payment

Make it a condition of payment:

Your payment application process should require current proof of insurance. No current COI = no check.

Use technology:

There are compliance management tools that automate certificate tracking, send renewal reminders, and flag gaps. If you're managing more than a handful of subs, the investment pays for itself.

The Bottom Line

Subcontractor compliance isn't glamorous, but it's essential. One uninsured accident can wipe out your profit margin—or worse.

The minimum:

• COI with proper limits and endorsements
• Verified Workers' Comp (or legitimate exemption)
• W-9 cross-checked against Sunbiz
• Active contractor license
• Signed subcontractor agreement

The habit:

• Verify before they mobilize
• Track expirations throughout the project
• Withhold payment when compliance fails

Need help reviewing your subcontractor compliance process? Contact Racks Insurance for a free consultation.