Does General Liability Cover Independent Contractors?

Understanding Liability Risks with Independent Contractors

Hiring independent contractors can bring flexibility and expertise to your business, but it also introduces potential liability risks that need careful consideration. Many business owners mistakenly believe that their General Liability (GL) insurance provides comprehensive protection, but the reality is more complex. If contractors lack their own coverage, your business might be exposed to significant risks.

Your GL Policy Covers Your Business

Independent contractors are not your employees, yet their actions can significantly impact your business operations. A General Liability policy usually covers lawsuits related to a contractor's work, but it doesn't automatically insure the contractor under your business's policy. This distinction is critical in understanding the limitations of your coverage and the need for additional measures.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

It's common for industries to mandate that contractors carry their own General Liability insurance. This practice ensures that any claims arising from their work are handled by their policy, not yours.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from contractors. Hiring without verifying their coverage increases your liability risk. A COI acts as a safeguard, proving their insurance validity.

Be Named as an Additional Insured

Require contractors to list your business as an additional insured on their policies. This step extends protection, mitigating risks associated with their tasks.

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

An Owner’s and Contractor’s Protective policy, obtained by the contractor, offers primary liability protection for your business. It adds an extra layer of security in case of claims.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly delineating insurance responsibilities and liabilities in contracts is vital. For instance, specifying who bears insurance duties can help avoid disputes, ensuring smooth project execution. Proper insurance coverage is crucial when engaging independent contractors. Failing to verify insurance could leave your business liable for unexpected claims. As a proactive measure, consider conducting a risk assessment of your current contractor policies to ensure full protection and peace of mind.