Does General Liability Cover Independent Workers?

The Importance of Understanding Liability Risks

When working with independent contractors, it's crucial to understand the liability risks involved. Many business owners mistakenly assume that their General Liability (GL) policy offers complete protection against potential claims. However, the reality is more nuanced. If a contractor doesn't have their own coverage, a business could face significant risks.

Your GL Policy Covers Your Business

Independent contractors are not employees, but their actions can still affect your business. While your GL policy may cover certain lawsuits related to the contractor’s work, it's important to note that independent contractors aren't automatically insured under your policy. This distinction is vital for understanding the extent of your coverage and potential vulnerabilities.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

One of the most effective ways to mitigate risk is to require contractors to carry their own GL insurance. This is a common practice in many industries. By ensuring that any claims arising from their work are covered by their policy, rather than your business’s, you safeguard your interests.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from contractors. Hiring contractors without verifying their coverage can lead to unwanted surprises. By obtaining proof of insurance, you confirm that they have the necessary coverage in place.

Be Named as an Additional Insured

Consider requiring contractors to list your business as an additional insured on their policy. This extension provides an extra layer of protection, covering your business and mitigating risk in case of a claim.

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

An OCP policy, purchased by the contractor but protecting your business, offers primary liability coverage. It ensures that your business remains safeguarded without relying solely on your GL policy.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clarifying insurance requirements and liability responsibilities in contracts is essential. A well-drafted contract can prevent disputes by clearly outlining who bears the responsibility for insurance coverage. This proactive approach helps avoid complications and ensures all parties are on the same page.

Understanding and managing liability risks is crucial when hiring independent contractors. Proper insurance coverage not only protects your business but also prevents unforeseen expenditures. Conduct a risk assessment of your current contractor policies to ensure you are fully covered and prepared for any situation.