Does General Liability Cover 1099 Workers?

Understand Liability Risks with Independent Contractors

Engaging independent contractors is a common practice for many businesses, but understanding the liability risks involved is crucial. Many business owners mistakenly believe their General Liability (GL) policy offers comprehensive coverage. However, the reality is far more complex, and failing to grasp these nuances could lead to significant risk, especially if your contractors lack their own insurance coverage.

Your GL Policy Covers Your Business

While independent contractors are not employees, their actions can significantly impact your business. It's important to know that although a GL policy may cover lawsuits related to the work of a contractor, these contractors are not automatically insured under your business’s policy. This means that liabilities from their work might not fall under your existing coverage.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

One proven way to mitigate risk is requiring contractors to carry their own General Liability insurance. Many industries have made this a standard practice, ensuring that any claims resulting from a contractor's work are covered by their policy, not the business's.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from contractors. This document verifies that the contractor holds the necessary coverage and helps prevent the risks associated with hiring uninsured contractors.

Be Named as an Additional Insured

Another protective measure is requiring contractors to add your business as an additional insured on their policy. This extends coverage, reducing potential risks to your business.

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

An OCP policy, purchased by the contractor, provides primary liability coverage for the business, offering an extra layer of security.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Contracts should clearly outline the insurance requirements and liability responsibilities. A well-crafted contract can prevent disputes and ensure all parties are aware of their roles. For example, detailing insurance requirements upfront can save headaches down the road. Proper insurance coverage is critical when hiring independent contractors. Failure to verify insurance could leave your business liable for claims. Conduct a risk assessment of your current contractor policies and take proactive steps to protect your business.