California presumes that someone who works for you is your employee unless they qualify otherwise, and an unlicensed sub doing work that requires a license is generally treated as the hiring contractor’s employee. So an uninsured sub is not just a paperwork gap; it is payroll you did not price and a claim your policy may not want. Collect certificates, endorsements and license details before work starts, and keep them current.
Why general contractors require subs to be insured
A general contractor is responsible to the owner for the whole job, including the parts other people do. Requiring subs to carry their own coverage keeps a claim about the sub’s work on the sub’s policy.
- General liability with the GC, and usually the owner, named as additional insured on ongoing and completed operations.
- Workers’ compensation with a waiver of subrogation in favor of the GC, or proof of a valid exemption.
- Commercial auto for vehicles driven to and on the site.
- Umbrella on larger jobs, following the same additional insured terms.
Owners and lenders usually push these requirements down from the prime contract, so the GC is often passing along a requirement it is under itself. What additional insured status actually does.
How an uninsured sub ends up on your audit
Workers’ comp and most contractor general liability policies are audited after the policy year. The auditor reviews what you paid to subcontractors and asks for proof that each one carried its own coverage during the time they worked for you.
- Workers’ comp auditPayments to a sub who cannot show valid comp coverage, or who does not qualify as a true independent business, are commonly added to your payroll and charged at the rate for the work they did.
- General liability auditMany contractor GL policies rate on subcontracted costs and charge uninsured subs at a higher rate, or as if they were your own payroll.
- TimingA certificate collected after the audit request, or one dated after the work, generally does not help.
This is the most common source of a surprise audit bill I see for growing contractors. It is avoidable with paperwork collected at the start of each job.
California presumes workers are employees
California law starts from the assumption that a person performing work for you is an employee. To treat someone as an independent contractor, you generally have to show they meet the ABC test: they are free from your control in how they do the work, the work is outside the usual course of your business, and they are customarily engaged in an independently established trade or business.
Construction has a specific exception for subcontractors, but it has conditions, including a written contract, a valid CSLB license in the right classification, and the sub operating as a genuine independent business. A sub who does not meet them may be treated as your employee for workers’ comp and wage purposes. Separately, an unlicensed person doing work that requires a license is generally treated as the hiring contractor’s employee for workers’ comp.
Classification is a legal question, and the stakes include penalties and back wages, not just premium. If you are unsure about a specific sub, ask an employment attorney.
Licensed subs, exemptions and 2028
Many small licensed subs have no employees and keep a workers’ comp exemption on file with CSLB instead of a policy. That is legal for most classifications today, but it creates a gap for you: your comp auditor may still charge for that sub, and if the sub brings a helper to your job, that helper has no coverage at all.
- Five classifications must carry comp regardless: C-8, C-20, C-22, C-39 and C-61/D-49. An exemption is not valid for them.
- From January 1, 2028, all licensed contractors will need workers’ comp, under SB 216 as postponed by SB 1455. Exemptions on file for most subs will stop being an option.
- Check CSLB’s license lookup for each sub: license status, classifications, bond, and whether comp or an exemption is on file.
More on workers’ comp with no employees.
What to collect from every subcontractor
- A signed subcontract with an insurance section, signed before work starts.
- A certificate of insurance for liability, comp and auto, naming you as certificate holder.
- The additional insured endorsements themselves, ongoing and completed operations, not just the certificate box.
- Waiver of subrogation and primary/non-contributory endorsements if your contract with the owner requires them of subs.
- A CSLB license check printed or saved with the date, showing active status and the right classification.
- Expiration tracking. Request a renewed certificate before each policy expires while the sub is still on your jobs.
The certificate checker walks through a sub’s certificate against what you require, and flags the things auditors and claims adjusters look for.
Your own policy may require it too
Many contractor general liability policies, particularly those written by surplus lines insurers, include a condition or exclusion tied to subcontractors. Typically it requires that your subs carry their own liability insurance at stated limits and name you as an additional insured, and it can limit or remove coverage for a claim involving a sub who did not.
Read that provision before you hire anyone. A sub who skipped insurance can leave you with an uncovered claim, not just a higher audit. How I build contractor programs and how I place workers’ comp.
Common questions
Do subcontractors need their own insurance in California?
A sub with employees must carry workers’ comp by law, and nearly every general contractor requires subs to carry their own liability insurance by contract. Without it, the sub’s work is commonly charged to the GC’s audits and claims can fall back on the GC.
Can a general contractor be charged for an uninsured sub?
Yes. Workers’ comp auditors commonly add payments to subs who cannot show their own coverage to the GC’s payroll, and many contractor GL policies charge uninsured subcontracted costs at a higher rate.
Is a 1099 subcontractor an employee in California?
Possibly. California presumes a worker is an employee unless the ABC test or a specific exception is met. Construction has a subcontractor exception with conditions, including a written contract and a valid CSLB license. An unlicensed sub doing work that requires a license is generally treated as the hiring contractor’s employee for workers’ comp.
Is a sub’s workers’ comp exemption enough?
It is legal for most classifications today if the sub truly has no employees, but auditors may still charge you for that sub. C-8, C-20, C-22, C-39 and C-61/D-49 cannot use an exemption, and from January 1, 2028 all licensed contractors will need workers’ comp.
Is a certificate of insurance from a sub enough?
It is the starting point, not the finish. A certificate confers no rights; ask for the additional insured and waiver endorsements themselves, verify the license with CSLB, and track expiration dates.
General information about subcontractor insurance in California as of October 2026, not legal advice. Worker classification and contract questions are legal questions; confirm your situation with counsel or CSLB. Coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.