Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

As a business owner, understanding your liability risks when working with independent contractors is crucial. Many business owners mistakenly assume that their General Liability (GL) policy offers comprehensive protection, but the reality is more nuanced. Failing to verify that contractors have their own coverage could pose significant risks to your business.

Your GL Policy Covers Your Business

Independent contractors are not employees, but their actions can significantly impact your business. While your GL policy may cover lawsuits involving the contractor’s work, it does not automatically insure independent contractors under your policy.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Many industries mandate that contractors maintain their own GL insurance policies. This requirement ensures that any claims arising from a contractor's work are covered by their policy instead of yours.

Ask for Proof of Insurance

It's important for businesses to request a certificate of insurance (COI) from contractors. This verification step helps mitigate risks associated with hiring contractors lacking appropriate coverage.

Be Named as an Additional Insured

Another crucial step is to require contractors to list your business as an additional insured. This extension of coverage helps mitigate risk and offers added protection.

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

An OCP policy, purchased by the contractor but covering your business, provides primary liability protection and can be a beneficial solution for managing risks.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability responsibilities in contracts is vital. A detailed contract prevents disputes and ensures all parties understand their obligations. For example, having a well-structured contract could prevent costly misunderstandings in case of a claim.

Ensuring proper insurance coverage when hiring independent contractors is critical to protect your business. Not verifying insurance could leave you responsible for unexpected claims. We encourage business owners to assess the risks associated with their current contractor policies to safeguard their operations.