Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

In today's business environment, hiring independent contractors is a common practice. However, understanding liability risks is crucial for all business owners who engage with these workers. It's easy to assume that your General Liability (GL) policy fully protects your business, but the reality is more nuanced. Failing to ensure that contractors have their own coverage can expose your business to significant risks.

Your GL Policy Covers Your Business

While independent contractors are not employees, their actions can still impact your business. Generally, a GL policy may cover lawsuits involving the contractor's work. However, independent contractors are not automatically insured under your business’s policy. This lack of automatic coverage underscores the need for additional protective measures.

Insurance Solutions to Reduce Your Risk

Require contractors to have their own GL insurance
Industries often mandate contractors to carry their own general liability policies. This practice ensures that claims arising from the contractor’s work are covered by their policy rather than your business’s. It is a practical way to safeguard your interests.

Ask for proof of insurance
It's critical to request a certificate of insurance (COI) from contractors. This document verifies their coverage and can shield your business from liability if a claim arises. Hiring contractors without confirming their insurance coverage introduces unnecessary risks.

Be named as an additional insured
By being listed as an additional insured on a contractor's policy, your business gains extra protection. This coverage extension is an effective risk mitigation strategy, providing reassurance that their insurance covers potential liabilities affecting your business.

Consider an Owner’s and Contractor’s Protective (OCP) Policy
An OCP policy, purchased by contractors but covering your business, offers primary liability protection. This policy ensures that liabilities arising from the contractor's work do not become your financial burden.

Use a well-drafted contract to clarify insurance responsibilities
Clear contracts are essential in defining insurance requirements and liability responsibilities. For instance, specifying these details can prevent disputes and ensure a smooth working relationship with contractors. A well-drafted contract serves as a powerful tool to manage risks associated with independent contractors.

Proper insurance coverage is crucial when hiring independent contractors. Failing to verify the insurance of those you hire can leave your business responsible for crucial claims. Act now by conducting a risk assessment of your current contractor policies and shore up any gaps in your insurance strategy.