Understanding liability risks when working with independent contractors is crucial for businesses today. Many business owners assume that their General Liability (GL) policy provides full coverage, but this assumption can lead to unforeseen risks if contractors lack proper coverage.
Your GL Policy Covers Your Business
Independent contractors are not employees, but their work can still affect your business. While a GL policy might cover lawsuits related to a contractor’s work, independent contractors are not automatically insured under your business’s policy.
Insurance Solutions to Reduce Your Risk
Require Contractors to Have Their Own GL Insurance
Many industries mandate that contractors carry their own policy. This ensures that any claims arising from their work are covered by their insurance rather than your business’s policy.
Ask for Proof of Insurance
Always request a certificate of insurance (COI) from contractors. Hiring contractors without verifying their coverage can be risky.
Be Named as an Additional Insured
Require contractors to list your business as an additional insured. This extends coverage and helps mitigate potential risks.
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.
Use a Well-Drafted Contract to Clarify Insurance Responsibilities
Clearly outline insurance requirements and liability responsibilities in contracts. A well-defined contract can prevent disputes.
Proper insurance coverage is critical when hiring independent contractors. Failing to verify insurance could leave your business liable for claims. We encourage a thorough risk assessment of your current contractor policies.