Does General Liability Cover Independent Workers?

Understanding the Risks of Liability with Independent Contractors

When you work with independent contractors, grasping the potential liability risks is crucial. Many business owners might assume their General Liability (GL) policy provides full protection. However, the reality is more nuanced. If these independent entities lack their own insurance coverage, businesses could face significant risks.

Your GL Policy Covers Your Business

Independent contractors are not employees, but their actions can still directly affect a business. While a GL policy may cover certain lawsuits involving the contractor’s work, independent contractors are not automatically insured under the business’s policy. Therefore, relying solely on your GL policy might not be sufficient.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Many industries require contractors to carry their own policies. This ensures that claims arising from their work are covered by their insurance rather than your business’s, thereby minimizing your exposure to potential liabilities.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from your contractors. It’s a critical step in safeguarding your business. Hiring contractors without verifying their coverage poses significant risks, as you might be liable for any claims arising from their services.

Be Named as an Additional Insured

Another effective risk mitigation strategy is to require contractors to list your business as an additional insured. This extends their coverage to include you and helps protect your business from potential claims tied to their work.

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

An OCP policy, usually purchased by the contractor, offers primary liability protection that covers your business. This option provides an extra layer of security by designating your business as the primary beneficiary of the policy.

Use a Well-drafted Contract to Clarify Insurance Responsibilities

A well-drafted contract is essential to clarify insurance requirements and liability responsibilities. A detailed contract can prevent disputes by clearly outlining each party's responsibilities and expectations regarding insurance coverage.

Stay Protected with the Right Coverage

Ensuring proper insurance coverage is vital when hiring independent contractors. Business owners who fail to verify insurance may find themselves responsible for any claims that arise. It’s advisable to conduct a thorough risk assessment of your current contractor policies to ensure robust protection against potential liabilities.