Michigan Residential Builders License Practice Test

In addition to a workers' compensation policy, what should a contractor ensure a subcontractor possesses for liability reduction?

1. A Certificate of Insurance

2. A Release of Liability Form

3. A workers' compensation exclusion certificate

4. A safety compliance certificate

The correct answer is: A Release of Liability Form

The best practice for a contractor looking to reduce liability in a construction project is to ensure that a subcontractor possesses a Certificate of Insurance. This document is issued by an insurance company and serves as proof that the subcontractor has active insurance coverage, which can include general liability and other relevant policies. Having a Certificate of Insurance offers several benefits. It protects the contractor by confirming that the subcontractor is insured, thereby mitigating financial risks associated with accidents, injuries, or damages that may occur during the project. Additionally, it helps to establish a clear line of accountability, as the subcontractor's insurance can provide coverage for claims that might arise from their work. While other documents mentioned, such as a release of liability form or safety compliance certificate, may contribute to a more comprehensive risk management strategy, they do not directly confirm the subcontractor’s insurance coverage, which is critical for liability reduction in construction projects. A workers' compensation exclusion certificate may not provide the necessary coverage assurance and could leave the contractor exposed to risks. Therefore, a Certificate of Insurance is the most crucial document for managing liabilities associated with subcontractors.