Does General Liability Cover Independent Contractors?
Understanding Liability Risks with Independent Contractors
When engaging independent contractors, it is crucial for business owners to comprehend the liability risks involved. Many assume a General Liability (GL) policy offers comprehensive protection, but the truth is more complex. Without proper coverage, businesses may face significant risks if contractors don't have their own insurance.
Your GL Policy Covers Your Business
Independent contractors are not employees, yet their actions can affect your business. While your GL policy might cover lawsuits related to a contractor's work, independent contractors aren't automatically insured under your policy. This distinction highlights the importance of understanding proper coverage.
Insurance Solutions to Reduce Your Risk
Require Contractors to Have Their Own GL Insurance
Many industries mandate that contractors carry their own GL insurance. This requirement ensures that any claims from their work are covered by their policy, reducing the potential burden on your business.
Ask for Proof of Insurance
Always request a certificate of insurance (COI) from contractors. This verification protects your business from the risks of hiring uninsured or underinsured contractors.
Be Named as an Additional Insured
Require contractors to list your business as an additional insured on their policy. This step extends coverage and mitigates risks associated with their activities.
Consider an Owner’s and Contractor’s Protective (OCP) Policy
An OCP policy, obtained by the contractor but covering your business, provides primary liability protection and reinforces your safety net.
Use a Well-Drafted Contract to Clarify Insurance Responsibilities
Ensure contracts clearly outline insurance requirements and liability responsibilities. For instance, a clear contract can help prevent disputes over coverage responsibilities.
Proper insurance coverage is essential when working with independent contractors. Failing to verify a contractor's coverage could leave your business exposed to claims. Conduct a thorough risk assessment of current contractor policies to protect your business.