A large project is not built by a contractor but by a tree. The project owner engages a main contractor; it subcontracts the packages; each package holder subcontracts its specialties; and some of those specialties in turn subcontract the fixing, the lifting or the welding. At the third or fourth tier are firms of a few employees whose names the project owner does not know, who signed no document it has read, and who nonetheless perform tasks on which the integrity of the works depends. The insurance contract, meanwhile, was negotiated at the top of the tree, with people who are not there.
The chain first raises a liability problem, and French law resolves it in a way that often surprises foreign parties. There is no contractual link between the project owner and a second-tier subcontractor: each may act only against the party it contracted with. Compensation therefore climbs the tree link by link, each turning against its own counterparty, and the chain is worth only what its weakest link is worth. A project owner that obtains judgment against its main contractor has won its case; it has collected nothing if that contractor is in liquidation, and it has no direct action against the subcontractor at fault beyond the particular cases the law provides for.
That observation explains the favor shown to the single policy described two modules earlier, and the mechanism must be seen precisely. By making all parties insureds under the same contract, the whole tree is short-circuited: the works are repaired with no climbing at all. But the schedule of insureds must then really cover every tier, and that is where wordings diverge. 'The main contractor and its subcontractors' says nothing about the subcontractor's subcontractor. 'Firms working on the site' covers them all but assumes one knows they are working. 'Subcontractors of any tier' is the only formula that settles the question head on, and it is not the most frequent.
The insurance certificate, which serves as proof throughout this arrangement, deserves to be seen for what it is: a declaratory document, issued on a date, about a contract that may have changed since. It does not prove that the premium was paid, nor that the contract was not cancelled the following month, nor that the activity actually carried out on site is among the declared activities, which is the most frequent and least checked point. A steelwork firm insured for steelwork that carries out, because the schedule demands it, a piece of civil engineering, is outside its declared activity, and its insurer will tell it so on the day it matters.
Two exclusions strike the chain in places nobody watches. Undeclared labor first, which deprives a firm of cover and places on the party engaging it a liability of its own, distinct from insurance. Unauthorized subcontracting next: most contracts require the project owner's prior approval of the subcontractor, and that approval is not an administrative formality, it is what makes the subcontractor enforceable. A third-tier subcontractor arriving on a Monday to hold a deadline, without approval, exists physically on the site and exists in no document, which is exactly the situation in which a loss becomes insoluble.
It must be added that the chain degrades in a specific direction, and that direction is predictable. The further down one goes, the smaller the firms, the less their equity absorbs a deductible, the lower their limits, and the higher the probability of disappearance within five years. Yet it is at the bottom of the tree that the acts on which the integrity of the works depends are performed: the weld, the packing, the torque, the laying of the waterproofing. The financial capacity to answer for a defect is therefore inversely proportional to the probability of causing one, and no clause corrects that asymmetry, which is structural.
The useful reading is therefore done in the opposite direction to the one in which the tree was built. Rather than starting from the project owner and going down, one starts from the critical acts of the works, names who actually performs them, and checks three things for each: is it an insured under the project contract, at what tier, and under what formula; does its declared activity cover what it actually does here; has it been approved, by a dated document. That pass is done once, it fits on a page, and it is done while the firms are arriving on site, never after the loss, where one generally discovers that the missing link is the one whose name nobody had.
On a bridge, the deck waterproofing is entrusted by the main contractor to a package holder, which subcontracts it to a specialist firm, which in turn subcontracts the laying itself to a three-person crew, not approved by the project owner. Eighteen months after acceptance, water ingress damages the deck: repair assessed at 3.4 million euros. Expert examination attributes the defect to faulty laying. The project's single policy, whose maintenance period has expired, named as insureds 'the main contractor and its subcontractors'. The package holder was wound up early in the year. The specialist firm is insured, but its certificate states the activity of building waterproofing and not of civil engineering structures. Where can the project owner go?
Four doors, and they must be tried in the order in which they close. The single policy first: its maintenance period has expired, it no longer responds, and the question whether 'its subcontractors' covered the third tier will not even arise. The contractual chain next: the project owner may act only against the main contractor, which turns against the package holder, which is wound up. The chain breaks at that link, and everything below becomes unreachable by that route, not for want of liability but for want of privity. That leaves the specialist firm's insurer, and that is where the file is decided: the declared activity is building waterproofing, the structure is a civil engineering work, and that difference is not one of drafting, it bears on distinct techniques, constraints and loss experience. The certificate produced at the start was true and proved nothing that mattered. That leaves finally the laying crew, unapproved: it is liable, it probably has neither suitable insurance nor capital, and its lack of approval deprives the project owner of the one document that would have made it enforceable. The non-obvious point is that the only act that would have changed the outcome cost nothing: checking, when the specialist firm arrived on site, that its declared activity matched the structure, and refusing an unapproved laying crew. Two checks, eighteen months earlier, against 3.4 million.
- 01Without privity, compensation climbs the tree link by link: a liquidation halfway up makes everything below unreachable, liability intact but inaccessible.
- 02'Its subcontractors' says nothing about the subcontractor's subcontractor: only the formula covering subcontractors of any tier settles the question head on, and it is not the most frequent.
- 03An insurance certificate is declaratory and dated: it proves neither payment, nor the absence of cancellation, nor above all that the declared activity covers what is done here.
- 04Approval of a subcontractor is not a formality: it is what makes it enforceable, and a crew arriving on a Monday without approval exists on the site and in no document.
- 05The financial capacity to answer for a defect decreases as one goes down, while it is at the bottom that the acts on which the integrity of the works depends are performed.