Does General Liability Cover 1099 Workers?

Understanding Liability Risks with Independent Contractors

Working with independent contractors is a common practice for many businesses. However, understanding the liability risks associated with this relationship is crucial. Many business owners mistakenly assume their General Liability (GL) policy provides comprehensive protection. The reality is more nuanced, and failing to recognize these nuances can expose your business to significant risks, especially if contractors do not have their own insurance coverage.

Your GL Policy Covers Your Business

It's important to note that independent contractors are not employees; yet, their actions and mistakes can still significantly impact your business. While a GL policy might cover lawsuits related to a contractor’s work, it does not mean that independent contractors are automatically insured under your business's policy. Ensuring they have separate coverage is essential to protect your interests.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

One of the most effective ways to mitigate risk is to require all independent contractors to maintain their own GL insurance policies. This practice is standard in many industries and ensures that any claims arising from their work are covered by their insurance, not yours.

Ask for Proof of Insurance

When engaging with independent contractors, always ask for a certificate of insurance (COI). Verifying their coverage helps protect your business from potential liability if the contractor’s work causes damages or claims.

Be Named as an Additional Insured

Require that your business be added as an additional insured on the contractor’s policy. This provision extends certain coverage rights to your business, further protecting you against liability from the contractor's operations.

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

An OCP policy, purchased by the contractor but specifically covering your business, provides primary liability protection. This policy can be a valuable tool in safeguarding your business interests.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

A comprehensive contract is vital. Clearly outline insurance requirements and liability responsibilities within agreements with contractors. Doing so can help prevent disputes and misunderstandings, as well as protect your business from unforeseen claims.

Proper insurance coverage is critical when working with independent contractors. Failing to verify their insurance status could leave your business liable for claims. We recommend conducting a thorough risk assessment of your current policies to ensure adequate protection.