Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

Navigating the complexities of business insurance can be challenging, especially when it comes to understanding liability risks associated with independent contractors. Many business owners mistakenly believe that their General Liability (GL) policy offers blanket coverage, protecting them completely against all risks. However, the landscape is more intricate, and the stakes can be high if contractors do not have their own insurance.

Your GL Policy Covers Your Business

Independent contractors, though not employees, can significantly influence your business operations. While a GL policy might cover lawsuits involving contractors' work, it does not automatically extend to the contractors as insured parties under the business's policy. Therefore, it's crucial for businesses to be clear-eyed about the limitations of their GL coverage when involving independent contractors.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Industries frequently mandate that contractors carry their own GL policy. This practice ensures that any claims tied to their work are addressed by their insurance rather than affecting the business. Businesses should make this a standard requirement for every contract engagement.

Ask for Proof of Insurance

Always ask for a certificate of insurance (COI) from your contractors. This document serves as proof of coverage and is crucial for mitigating risk. Hiring contractors without verifying their insurance can expose your business to significant liabilities.

Be Named as an Additional Insured

Requiring that your business is listed as an additional insured on a contractor's policy can extend valuable coverage and reduce risk. This small step offers an extra layer of protection ensuring that your interests are safeguarded.

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

An OCP policy, purchased by the contractor, provides primary liability protection for the business. This policy can serve as an effective buffer between the contractor's operations and potential legal implications on your business.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Crafting a meticulous contract that clearly outlines insurance mandates and liability responsibilities is essential. For example, specifying insurance coverage requirements can prevent future disputes and ensure all parties understand their obligations. Proper insurance coverage is a cornerstone of responsible business operations, particularly when hiring independent contractors. Failing to verify their insurance can leave your business vulnerable to claims. We recommend that business owners conduct a thorough risk assessment of their current contractor policies to fortify their protection strategies.