FRIDAY, AUGUST 13, 2021
Many businesses today are turning to independent contractors. These are non-employees that provide comprehensive services, often at a lower cost than a full-time employee.
Independent contractors operate as a separate entity from your business. They are not your direct employees, but they perform work on your company's behalf. 
With that in mind, what happens when a mistake occurs? Will your general liability insurance cover the damage independent contractors cause?
What Does Your Insurance Policy Say?
This is one area where many business insurance policies differ. General liability insurance generally does not protect independent contractors or subcontractors. This means your insurance likely does not cover independent contractor mistakes or protect your customers from them. It also likely does not cover accidents or other damage they cause.
That said, other policies do provide coverage, to some extent. You’ll need to read through your policy to see how much coverage it specifically provides.
Why it critical to understand your coverage in this regard. Consider the following example.
Let's say you hire an independent contractor to cut down a tree for your customer. The customer is paying for yard maintenance. The tree falls and strikes the home, causing significant damage. The independent contractor holds responsibility for the loss. Yet, your general liability policy indicates that coverage does not apply to independent contractors.
The homeowner likely does not recognize this. In their mind, your company remains responsible. Your company might face an expensive lawsuit, as a result. At the very least, your company’s reputation will be called into question, all because of an error made by a third-party.
What Can You Do to Minimize These Risks?
Make sure you know what your coverage says about independent contractor liability before you bring these contractors on board. Also, tell your insurer you hope to use these professionals.
When you consider using independent contractors, focus on who you bring on board. Choose all subcontractors and independent contractors based on experience and skill. Most importantly, insist that they maintain their own general liability insurance coverage as a condition of service. A simple BOP may be enough coverage for this type of company.
You may also wish to extend your basic general liability insurance with umbrella coverage. This can provide an additional layer of liability protection for you. It may help cover some of the losses if your customer takes you to court as a result of an independent contractor's mistakes.
Do not assume your business insurance provides comprehensive coverage. Instead, discuss your needs with an McFarlin Insurance Agency agent. Our agents make sure you have coverage for those who work for your company or on behalf of your business.
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