1099 SUBCONTRACTOR RISK
YOUR SUBCONTRACTOR'S
CERTIFICATE WAS VALID
WHEN YOU HIRED HIM.
It wasn't valid on the date of the job. Your carrier found the lapsed certificate before you did. The $34,000 claim is yours. That is the subcontractor compliance gap — and it costs home service franchisees money in three completely different ways.
No cost. No obligation. We find the gaps before your carrier does.
Certificate monitoring included for all Rikor clients · Updated 2026
HOW IT HAPPENS — EVERY TIME
YOU HIRE
You collect the certificate. It's valid. Job gets done. You move on.
MONTHS PASS
Their policy renews on their carrier's date — nothing to do with yours. Nobody sends you the new certificate. The old one is still in your file.
CLAIM
Something goes wrong on the job. Subcontractor exclusion applies. Their carrier cites the lapsed cert. Your policy absorbs the loss.
AUDIT BILL
Something goes wrong on the job. Subcontractor exclusion applies. Their carrier cites the lapsed cert. Your policy absorbs the loss.
$50K
AVERAGE COMPLETED OPERATIONS CLAIM BEFORE DEFENSE COSTS
$260K
ELECTRICAL SUB FIRE CLAIM — COMPLETED OPERATIONS, LAPSED CERTIFICATE
$11.7K
ROOFING WC AUDIT ADJUSTMENT — ONE UNINSURED SUB CREW, ONE SEASON
$186K
DIRECT INJURY LIABILITY — 1099 WITH NO WC, NO COVERAGE FLOOR
2 Bills
WC AUDIT + GL AUDIT — SAME LAPSED CERTIFICATE, TWO SEPARATE SURPRISES
ONE LAPSED CERTIFICATE.
THREE WAYS IT COSTS YOU.
The mechanism is the same across every home service trade. The certificate in your file confirms coverage existed when you collected it. It does not guarantee coverage exists on the date of the job, the date of the claim, or the date of your audit.
EXPOSURE 1
THE WC AUDIT ADJUSTMENT
Your workers' compensation carrier audits payroll at year-end. Every subcontractor who cannot produce a current certificate has their payroll added to yours — at your classification rate. A roofing sub at $9.75 per $100 of payroll. An HVAC sub at $6.50. A single uninsured crew for one season can produce a five-figure bill that arrives with your renewal and requires immediate payment. No negotiation. No warning.
EXPOSURE 2
THE DENIED CLAIM
Your general liability policy has a subcontractor exclusion. Standard language. Every policy has one. When your subcontractor causes a loss and their certificate has lapsed, your carrier cites the exclusion — and the claim routes to your policy or to no policy at all. This is not about fault. The subcontractor did exactly what you hired them to do. The exclusion does not care. It applies the moment a current certificate cannot be produced for the date of the loss.
EXPOSURE 3
THE DIRECT INJURY LIABILITY
A 1099 worker injured on your job with no workers' compensation of their own. Workers' compensation exists as the floor — the limit on what an injured worker can collect. Without it, there is no floor. Their medical costs, lost wages, and pain and suffering can become your direct obligation, uncapped and uninsured. This is not a claim against your policy. It is a claim against you. It is the exposure most franchisees never think about until it happens.
THE AUDIT MATH. SHOWN.
Two separate audits. Two separate bills. Both trace back to the same lapsed certificate. They arrive together — 3 to 4 months after your policy expires.
WORKERS' COMPENSATION AUDIT
Roofing sub expense — season total
$120,000
WC classification rate (roofing)
$9.75 / $100
Certificate status at audit date
Lapsed
Audit adjustment added to bill
$11,700
Due with renewal. No negotiation available. The sub finished the work months ago. They've moved on. You're holding the bill.
GENERAL LIABILITY AUDIT
Uninsured sub expenses — policy year
$80,000
✓ Insured sub rate (certificate on file)
$1.20 / $100
✗ Uninsured sub rate (lapsed certificate)
$6.00 / $100
Rate applied at audit
$6.00 / $100 (5× insured rate)
Additional GL premium due
$4,800
The certificate status on your audit date controls the rate — not the date you collected it. Both bills land at the same time as your renewal.
REAL CLAIMS. REAL DOLLARS.
ALL FROM THE SAME GAP.
These are the scenarios that produce the calls. Every trade. Same mechanism — lapsed certificate, exclusion applied, franchisee holding the check.
PLUMBING · WATER LOSS · DENIED CLAIM
THE 1099 OVERFLOW PLUMBER
$34,000
Franchisee absorbed
A franchisee dispatched a 1099 overflow plumber on a busy Tuesday. Certificate on file — dated eight months earlier. The sub's policy had renewed in March. The certificate in the file was from the prior term. The plumber caused a water intrusion loss. Carrier pulled the certificate, confirmed the lapsed policy, cited the subcontractor exclusion. Franchisee wrote the check.
The certificate must be current on the date of the job — not the date you hired the sub. The audit date is what controls.
ELECTRICAL · FIRE · COMPLETED OPERATIONS
THE COMMERCIAL ROUGH-IN
$260,000
Aggregate depleted
A franchisee subcontracted rough-in wiring for a commercial tenant improvement. Electrician's certificate expired four months before the job. Six months after completion, a wiring fault caused a fire. $260,000 in property damage and business interruption. The subcontractor had dissolved his business. Carrier found the lapsed certificate. Completed operations coverage that would have responded did not exist in a current form. The claim went to the franchisee's GL aggregate — depleted it entirely. Zero capacity remaining for the rest of the policy year.
ROOFING · WC AUDIT · STORM SURGE
THREE SUB CREWS, ONE SEASON, ONE BILL
$11,700
WC audit adjustment
A franchisee used three storm-response sub crews during a busy season. All three certificates collected at hire. One crew's policy lapsed six weeks into the engagement — franchisee didn't know, nobody told them. At year-end audit, carrier found the gap. $120,000 in sub payroll at a WC rate of $9.75 per $100. Audit adjustment: $11,700. Added to the renewal bill. Due in 30 days. The sub finished the season and moved on months earlier.
RESTORATION · DIRECT INJURY · NO WC FLOOR
The 1099 With No Workers' Comp
$186,000
Personal exposure
A 1099 pack-out crew member fell from a ladder on a large loss job. Fractured wrist, torn rotator cuff. The crew's WC certificate had lapsed during the off-season — they hadn't renewed because work had been slow. No workers' compensation of their own. Medical costs, lost wages, and subsequent lawsuit totaled $186,000. The franchisee's GL policy covered the premises liability component but cannot serve as a WC substitute. The balance was personal exposure — no policy limit, no buffer, no cap.
PEST CONTROL · BOTH EXCLUSIONS APPLY
WHEN TWO EXCLUSIONS HIT THE SAME CLAIM
$22,000
Out-of-pocket settlement
A franchisee subcontracted pesticide application to a licensed operator. Certificate on file — but the policy carried a pollution exclusion that applied to pesticide drift. The certificate had also lapsed two months earlier. Drift damaged a neighboring property. Sub's carrier denied on pollution exclusion. Franchisee's carrier denied on subcontractor exclusion plus pollution. Neither policy responded. $22,000 out-of-pocket settlement to avoid litigation. Two exclusions. One lapsed certificate. Nothing covered.
We identify your specific gaps before they become your specific claims.
THE RULE MOST FRANCHISEES GET WRONG
COLLECTING A CERTIFICATE IS NOT
THE SAME AS HAVING COVERAGE.
A certificate is a snapshot. It shows that coverage existed on the date it was issued. It does not guarantee coverage exists on the date your sub is on your job, the date the claim happens, or the date of your audit.
POLICY CANCELLED
Non-payment mid-term. Certificate goes stale immediately. You won't know until you ask — or until the claim surfaces.
POLICY NOT RENEWED
Expires on their anniversary date. New certificate needed for coverage to continue. No automatic notification to you.
LIMITS REDUCED
Sub downgrades their coverage at renewal. Certificate in your file shows old limits. New limits may not meet your franchise requirements.
None of these generate automatic notification to you. Your sub's carrier does not call you when the policy lapses. Your sub does not always know themselves. The certificate in your file is evidence of past coverage. Current coverage requires current verification.
WHAT EVERY SUBCONTRACTOR
NEEDS TO CARRY
Four coverage lines. Confirmed before the job. Current on the date of audit — not just the date you hired them. Your franchise agreement almost certainly extends its insurance requirements to your subcontractors, including the additional insured endorsement that names your franchisor.
COVERAGE LINE
MINIMUM LIMIT
General Liability
$1M / $2M
Occurrence form. Your entity and your franchisor both named as additional insured. This is what routes their claim to their policy first — not yours.
Workers' Compensation
Statutory
Required in your state. This is the document that keeps their payroll off your audit. Statutory means the minimums your state requires.
Commercial Auto
$1M CSL
Any vehicle on your job — including their personal truck if it's carrying tools or materials to your site. Personal auto excludes business use.
Employers' Liability
$1M / $1M / $1M
The layer above WC statutory limits. Required for your own employees by most franchise agreements — require it from your subs for the same reason.
Additional Insured Endorsement
Required
Your entity named. Not optional. Required by your franchise agreement. A certificate without the endorsement is not the same as being named.
THE RULE THAT MOST FRANCHISEES MISS
The certificate must be current on the date of the job — not the date you hired the sub. A sub whose policy renewed in March with an October certificate in your file is working without valid coverage in your program. The audit date is what controls.
START WITH A WRITTEN AGREEMENT
A certificate without a written agreement is a certificate without enforcement. Before any 1099 performs work under your franchise, they should sign an agreement specifying coverage requirements, certificate collection rules, and what happens if they fail to maintain coverage.
Sample template only. Not legal advice. Review with a qualified attorney before use.
GET YOUR FREE
COVERAGE REVIEW
We look at what you currently carry, what your franchise agreement requires from subs, and where your program leaves gaps. Most reviews surface at least one problem the franchisee didn't know existed. 20 minutes. No obligation.
We'll be in touch within one business day.
📋
CERTIFICATE MONITORING — INCLUDED
Rikor clients get subcontractor COI tracking built into their program. No separate tool. No add-on fee. Every expiration tracked. Every lapse flagged before it becomes a claim.
HOW RIKOR CLIENTS HANDLE THIS
Most franchisees had no idea the certificate was stale. It was in the file. The exposure was building quietly. By the time the bill arrived, the sub had moved on. That's a process problem — and it's fixable.
01
COVERAGE REVIEW
We look at your current policy, your subcontractor roster, your certificate documentation, and your franchise agreement requirements. We identify gaps before your next audit date — not after.
02
PROGRAM BUILT
Coverage that matches your actual operations — subcontractor monitoring built in from day one. This is not a separate tool you manage. It is part of how we manage your program for you.
03
MONITORING RUNS
Every certificate tracked in real time. Lapses surfaced before the next job starts — not after the claim arrives or the audit bill lands three months after expiration.
20 minutes. No obligation. Monitoring included when you become a client.
SIMPLE PROCESS.
PROVEN OUTCOME.
WITHOUT RIKOR
WITH RIKOR
Certificate collected at hire — never checked again
Active monitoring across your entire sub roster
Expired policies discovered at claim time
Expiration alerts before the lapse
Uninsured sub payroll found at audit — bill due immediately
WC gaps flagged before year-end
Scrambling for documentation when carrier asks
Audit-ready file, always current
Manual certificate chasing before every job
Automated COI collection
Policies cancelled mid-project without notice
Real-time cancellation alerts
Wondering if coverage meets your franchise requirements
Coverage analyzed against your FDD requirements
No written agreement with subs — enforcement unclear
Sample agreement + monitoring = documented compliance