Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

As a business owner, understanding liability risks when working with independent contractors is crucial. It’s a common assumption that a General Liability (GL) policy provides full protection, but this protection can be more nuanced than it seems. The risks escalate significantly if contractors do not have their own insurance coverage, potentially leaving your business vulnerable to claims.

Your GL Policy Covers Your Business

Independent contractors, while not employees, can still impact your business through their actions. A GL policy might cover lawsuits involving a contractor's work, but it doesn’t automatically extend insurance to independent contractors under your business’s policy. This distinction is vital for avoiding unexpected liabilities.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Requiring contractors to have their own General Liability insurance is a standard industry practice. This ensures that any claims related to their work are covered by their policy, not yours, effectively minimizing risks to your business.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from contractors as proof of coverage. Hiring without verifying their insurance could leave you holding responsibility for claims, so this step is crucial in protecting your business.

Be Named as an Additional Insured

Requiring contractors to list your business as an additional insured on their policy extends your coverage and helps mitigate potential risks.

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

An OCP policy, which the contractor purchases but covers your business, can provide primary liability protection, thus securing your interests.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability responsibilities in contracts helps prevent disputes. A thorough contract can be the key to ensuring all parties understand their insurance roles, greatly easing potential conflicts.

Proper insurance coverage is critical when hiring independent contractors. Failing to verify a contractor’s insurance could leave you responsible for claims against your business. Consider conducting a risk assessment of your current contractor policies to safeguard your operations effectively.