Does General Liability Cover Independent Workers?

Understanding Liability Risks with Independent Contractors

Partnering with independent contractors can be a strategic move for businesses, but understanding the liability risks is crucial. Many business owners assume their General Liability (GL) policy provides full coverage, but the reality is more nuanced. Without the right protections, your business could face significant risks if contractors don’t have their insurance.

Your GL Policy Covers Your Business

Independent contractors are not employees; however, their actions can still impact your business. While your GL policy may cover lawsuits involving a contractor’s work to some extent, it's important to note that contractors are not automatically covered under your business's policy. This oversight can leave your business vulnerable, especially if the contractor lacks insurance.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Many industries mandate that contractors carry their own general liability policy. This practice ensures that any claims arising from their work are covered by their own insurance, not yours.

Ask for Proof of Insurance

It's prudent to request a certificate of insurance (COI) from contractors. Hiring a contractor without verifying their coverage exposes your business to unnecessary risks.

Be Named as an Additional Insured

By requiring contractors to list your business as an additional insured, you extend your coverage and mitigate potential risks. This approach provides an added layer of security.

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

An OCP policy purchased by the contractor can provide your business with primary liability protection, making it a valuable consideration in your risk management strategy.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability in your contracts is essential. A comprehensive contract can avoid disputes and ensure both parties understand their responsibilities. Properly managing insurance coverage is a critical step when hiring independent contractors. Business owners should conduct a risk assessment of current contractor policies to ensure compliance and adequate protection, keeping their operations safe and secure.