Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

Collaborating with independent contractors offers flexibility and access to specialized skills, but it also brings unique liability risks. Many business owners mistakenly assume their General Liability (GL) policy offers full protection, yet the truth is more nuanced. If contractors are not adequately insured, your business might bear the cost of any claims or damages they incur.

Your GL Policy Covers Your Business

Independent contractors are not employees, but their actions can still significantly impact your business. It's essential to understand that while your GL policy might cover lawsuits stemming from a contractor's work, the contractors themselves are not automatically insured under the policy. This distinction can lead to unexpected liabilities if proper coverage isn't ensured.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Businesses in many industries mandate that contractors maintain their own GL insurance. This common practice ensures that any claims arising from the contractor's work are covered by their policy, safeguarding the hiring business from bearing undue financial burdens.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from your contractors. Verifying a contractor's coverage is crucial because it can mitigate risks associated with hiring uninsured individuals or companies.

Be Named as an Additional Insured

By requiring your business to be listed as an additional insured on a contractor's policy, you extend coverage and significantly mitigate risks associated with their work.

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

An OCP policy, which the contractor can purchase but will cover your business, provides primary liability protection. This strategy places responsibility primarily on the contractor, further protecting your business.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability responsibilities within a contract is vital. For example, a detailed agreement can help prevent disputes by specifying each party's coverage commitments. Conclusively, securing appropriate insurance coverage with independent contractors is critical. Neglecting to verify insurance can make your business liable for claims, potentially harming your financial standing. It is advisable for business owners to conduct a thorough risk assessment of their current contractor policies to ensure comprehensive coverage and protection.