Does General Liability Cover 1099 Workers?

Understanding Liability Risks with Independent Contractors

When working with independent contractors, understanding liability risks is crucial. Many business owners assume that a General Liability (GL) insurance policy offers complete protection. However, the reality is more nuanced. The absence of proper coverage for independent contractors could expose your business to significant risks. Therefore, it's essential to grasp the intricacies of GL insurance as it pertains to independent or 1099 workers.

Your GL Policy Covers Your Business

Independent contractors, while not employees, can influence your business. While a GL policy may cover lawsuits related to the contractor’s work, it's important to know that independent contractors are not automatically insured under the business’s policy. Understanding this distinction is vital for protecting your business.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Some industries mandate that contractors carry their own policy. This ensures that any claims from their work are covered under their policy, reducing business liability.

Ask for Proof of Insurance

Always request a certificate of insurance (COI) from contractors. Hiring without verified coverage is risky—proof of insurance is essential for mitigating those risks.

Be Named as an Additional Insured

Requiring contractors to list your business as an additional insured can extend coverage and help safeguard against claims, ultimately reducing your risk exposure.

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

An OCP policy, purchased by the contractor, can provide primary liability protection to your business, offering an extra layer of security.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Clearly outline insurance and liability responsibilities in contracts. A well-drafted contract can help prevent disputes and ensure that all parties understand their obligations. Proper insurance coverage is critical when hiring independent contractors. If insurance verification is overlooked, you might find yourself personally liable for potential claims. Conduct a risk assessment of your current contractor policies today to safeguard your business effectively.