Does General Liability Coverage Include 1099 Workers?

Understanding the Importance of Liability Risks

Working with independent contractors can offer flexibility and expertise to businesses, but it also presents unique liability risks. Many business owners mistakenly believe that their General Liability (GL) policy provides comprehensive protection. However, the reality is more intricate, and the risks are significant if contractors don't have their own insurance coverage.

Your GL Policy Covers Your Business

It's crucial to understand that independent contractors are not employees. However, their actions can still significantly impact your business. While a GL policy may offer some coverage if a lawsuit involves work done by an independent contractor, these contractors are not automatically covered under your business's policy. This misunderstanding could leave your business vulnerable to potential liabilities.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Many industries mandate that contractors have their own GL insurance. This requirement shifts the responsibility to the contractor’s policy for any claims arising from their work, ensuring your business is not liable.

Ask for Proof of Insurance

Businesses should request a certificate of insurance (COI) from contractors to verify their coverage. Hiring contractors without checking this documentation can expose your business to unnecessary risks.

Be Named as an Additional Insured

Requiring contractors to name your business as an additional insured on their policy can extend coverage and significantly mitigate risks.

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

An OCP policy, typically purchased by the contractor but providing coverage for the business, offers primary liability protection for work performed on behalf of the business.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outlining insurance requirements and liability responsibilities in contracts is essential. A precise contract can prevent disputes and protect against claims.

Proper insurance coverage is a critical component when hiring independent contractors. Neglecting to verify contractor insurance can leave your business exposed to potential claims. Conduct a thorough risk assessment of your current contractor policies to ensure adequate protection.