Does General Liability Cover Independent Workers?

Understanding Liability Risks with Independent Contractors

Working with independent contractors, also known as 1099 workers, is increasingly common, yet many business owners may not fully understand the liability risks involved. An assumption that a General Liability (GL) insurance policy provides comprehensive protection is often incorrect. Understanding these nuances is crucial, as relying solely on your policy without ensuring contractors have their own insurance can expose your business to significant risks.

Your GL Policy Covers Your Business

It's important to note that independent contractors are not classified as employees. Despite this, the work they perform can still impact your business significantly. In the event of a lawsuit tied to their work, your GL policy might offer some protection, but these contractors are not automatically covered under your business policy. As such, their activities and any related claims might fall outside your coverage.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

A common practice across many industries involves requiring contractors to secure their own General Liability insurance. This strategy ensures that claims arising from their work fall under their policy instead of affecting your business' claims history and premiums.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from contractors. Without verifying their coverage, you risk unnecessary exposure, which could be financially damaging if an uninsured contractor causes a liability issue.

Be Named as an Additional Insured

By requiring contractors to list your business as an additional insured, you effectively extend their coverage to protect your own interests. This step helps mitigate risks by ensuring that any claims related to their work are accounted for within their policy.

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

An OCP policy, while purchased by the contractor, serves your business by providing primary liability protection specific to the operations they perform for you. This policy ensures your business is protected in the event of a liability claim associated with their work.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability responsibilities within contracts can prevent disputes. A detailed agreement enhances clarity, ensuring both parties understand their obligations, thereby reducing potential conflicts. Ultimately, ensuring independent contractors have proper insurance coverage is vital to minimizing risk when hiring. Business owners should regularly reassess their contractor policies to ensure they are adequately protected and aligned with industry best practices.