Does General Liability Cover 1099 Workers?

The Importance of Understanding Liability Risks

When you run a business, working with independent contractors can be both beneficial and complex, especially in terms of liability. Many business owners mistakenly assume that their General Liability (GL) policy offers full coverage. However, the nuances of these policies mean that relying solely on GL insurance can be a risky endeavor if your contractors don’t have their own coverage.

Your GL Policy Covers Your Business

Independent contractors aren’t your employees, but their work can undoubtedly affect your business. While a GL policy may cover lawsuits stemming from a contractor's activities, it's crucial to note that these individuals are not insured under your policy by default. This gap can leave your business exposed to potential claims and financial liabilities if not addressed properly.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

In many industries, it's standard practice to require contractors to carry their own GL insurance. This ensures that any claims originating from their work are covered by their policy, thereby shielding your business from unnecessary risk.

Ask for Proof of Insurance

One practical step is to request a certificate of insurance (COI) from your contractors. Not verifying a contractor's insurance status before hiring them can put your business at significant risk.

Be Named as an Additional Insured

By requiring contractors to list your business as an additional insured on their insurance policy, you can extend your coverage and mitigate potential risks.

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

An OCP policy is something a contractor buys, but it covers the business as primary liability protection. This adds an extra layer of security for your business interests.

Use a Well-Drafted Contract to Clarify Responsibilities

Having a clear contract that outlines all insurance requirements and liability responsibilities is paramount. A well-drafted contract can avert disputes and smooth out any potential misunderstandings before they arise. For instance, a contract that specifies how liability is handled can prevent finger-pointing should something go awry.

In conclusion, ensuring adequate insurance coverage is critical when hiring independent contractors. If their insurance isn’t verified, you might end up bearing the brunt of claims that rightfully should be theirs. We recommend that business owners assess their current contractor policies to ensure proper measures are in place to safeguard against liability risks.