Understanding General Liability for 1099 Workers

Recognizing the Risks of Independent Contractors

In today's dynamic business environment, working with independent contractors is commonplace. However, it's crucial for business owners to understand the liability risks involved. Many assume that their General Liability (GL) policy provides comprehensive protection, only to discover that it's more nuanced. Without adequate coverage, businesses are exposed to potential liabilities if contractors lack their own insurance.

Your GL Policy Covers Your Business

Independent contractors are distinct from employees, yet their actions can significantly influence your operations. While a GL policy might cover claims arising from a contractor's work, it doesn't automatically insure these individuals under your policy. This reality necessitates clear insurance strategies to mitigate risk.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

It's common for industries to demand that contractors carry their own General Liability policies. This approach ensures that any claims stemming from their work fall under their insurance, not yours.

Ask for Proof of Insurance

Request a certificate of insurance (COI) from contractors to verify their coverage. Engaging those without confirmation of insurance exposes your business to potential claims and financial repercussions.

Be Named as an Additional Insured

Require contractors to list your business as an additional insured on their policy. This step extends coverage, offering a protective layer against liabilities arising from their work.

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

An OCP policy, acquired by the contractor, provides primary liability coverage for the business. Such policies are a robust safeguard against potential claims.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

Insurance responsibilities in contracts should be explicit. A clear agreement detailing these obligations can avert disputes and ensure all parties understand their roles and responsibilities.

The Importance of Proper Insurance Coverage

Ensuring that independent contractors have appropriate insurance coverage is paramount. Failing to verify could leave your business liable for claims—a scenario no company wants to face. Proactively conducting a risk assessment of your contractor policies is a sound strategy to protect your interests.