Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

When working with independent contractors, understanding the nuances of liability risks is essential. Many business owners may assume that their General Liability (GL) policy provides comprehensive protection. However, the situation is more complex. Without the proper coverage, businesses face significant risks if contractors don't have their own insurance.

Your GL Policy Covers Your Business

Independent contractors, although not employees, can significantly impact your business through their actions. While a General Liability policy might cover lawsuits related to the work of contractors, it does not automatically cover the contractors themselves under the business's policy. This distinction is crucial for mitigating potential liability.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Many industries mandate that contractors hold their own General Liability insurance. This requirement ensures that claims arising from their work are covered by their own policies rather than falling on the hiring business.

Ask for Proof of Insurance

Requesting a certificate of insurance (COI) from contractors is a wise practice. Verifying coverage before hiring reduces the risks associated with uninsured contractors.

Be Named as an Additional Insured

Requiring contractors to list the business as an additional insured on their policy extends coverage, providing extra protection and mitigating potential risks.

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

An OCP policy, though purchased by the contractor, primarily protects the hiring business, offering essential liability coverage.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability responsibilities in contracts is crucial. A well-drafted contract can prevent disputes, as illustrated in many industry examples. Proper insurance coverage is critical when hiring independent contractors. Businesses that fail to verify insurance may find themselves liable for claims. Conducting a risk assessment of current contractor policies is a proactive step towards safeguarding your business interests.