Does General Liability Cover Independent Workers?

Understanding Risks with Independent Contractors

For businesses today, navigating the world of independent contractors can be a complex task. It’s crucial to grasp the liability risks when integrating 1099 workers into your operations. Many business owners mistakenly believe that their General Liability (GL) policy fully protects them in the event of an incident involving a contractor. However, the reality is more nuanced. Failing to ensure that your contractors have appropriate coverage could expose your business to significant risks.

Your GL Policy Covers Your Business

Independent contractors differ from your regular employees, yet their work can significantly impact your business. While your GL policy may handle lawsuits related to an independent contractor's work, it does not automatically extend insurance coverage to the contractor. This means that if a contractor causes damage or injury, your policy may not cover all the resulting costs or legal fees.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

One strategy to minimize risk is requiring your contractors to carry their own General Liability insurance. This is a standard practice across many industries because it ensures that any claims arising from the contractor’s actions are directed towards their policy, rather than yours.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from your contractors. This document serves as verification that they have the necessary coverage. Hiring contractors without this assurance is risky, as it may leave your business vulnerable to uncovered claims.

Be Named as an Additional Insured

Consider having your business listed as an additional insured on your contractor’s policy. This step provides an extra layer of protection by extending the contractor’s insurance coverage to your company.

Consider an Owner’s and Contractor’s Protective (OCP) Policy

Another option is an OCP policy, purchased by the contractor. This policy specifically covers a business against liabilities for negligent acts of contractors during operations. While it’s an extra cost, it offers primary liability protection for the business.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Drafting a comprehensive contract that clearly outlines insurance requirements and liability responsibilities is essential. A well-crafted agreement can prevent legal disputes by setting clear expectations for both parties. By taking these measures, you safeguard your business from potential claims that could otherwise fall back on you. Proper insurance coverage isn't just a regulatory checkbox; it's a critical component of sound business practice when hiring independent contractors. Business owners should regularly assess the risks associated with their contractors’ policies to ensure you're not left accountable for unforeseen accidents or damages. Undertaking a risk assessment of your current contractor policies is a proactive step towards mitigating liability concerns.