Does General Liability Cover Independent Workers?

Understanding the Risks of Working with Independent Contractors

In today's business climate, working with independent contractors is commonplace across many industries. However, business owners often mistakenly believe that their General Liability (GL) policy offers complete protection against all potential risks associated with these contractors. The reality is far more complex, and understanding the nuances is crucial to safeguarding your business.

Your GL Policy Covers Your Business

Independent contractors, while not employees, can still create liability risks for your business. Although a GL policy might cover lawsuits involving work done by contractors, these independent contractors are not inherently insured under your business’s policy. Thus, their actions, if negligent, could have significant repercussions for your operations.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

One of the most effective measures to mitigate risk is requiring contractors to carry their own GL insurance. Many industries mandate this practice, as it ensures that any claims arising from a contractor's work fall under their insurance, not yours.

Ask for Proof of Insurance

Before hiring a contractor, always request a certificate of insurance (COI). This verification prevents the risk associated with employing contractors who lack adequate coverage, potentially leaving your business vulnerable to claims.

Be Named as an Additional Insured

By having contractors list your business as an additional insured on their policy, you extend your coverage and reduce risks associated with their work. This simple step provides additional peace of mind for your business.

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

An OCP policy is purchased by the contractor but focuses on protecting the business primarily, offering an extra layer of liability protection where needed.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Contracts are essential for clearly outlining the scope of work, insurance requirements, and liability responsibilities. A well-drafted agreement can prevent disputes and ensure that both parties understand their insurance obligations, which is vital to maintaining clear, risk-free business relationships.

Proper insurance coverage is critical when hiring independent contractors. Failing to verify insurance can leave your business liable for claims, which could be financially devastating. Business owners should routinely assess their contractor policies, ensuring risk management strategies are robust and comprehensive.