Jul 10 2025 19:00

Does General Liability Cover Independent 1099 Workers?

Understanding Liability Risks When Using Independent Contractors

As more businesses turn to independent contractors for specialized projects, understanding liability risks becomes increasingly critical. Many business owners mistakenly believe that their General Liability (GL) insurance offers complete protection against incidents involving independent contractors. However, the reality is more nuanced, and the risks are substantial if these contractors do not possess their own insurance coverage.

Your GL Policy Covers Your Business

Independent contractors operate differently from employees, yet their work can significantly impact your business. While a General Liability policy might cover lawsuits arising from the work performed by contractors, these individuals are not automatically protected under your company’s policy. Ensuring adequate coverage requires careful consideration of both your business’s and the contractor’s insurance status.

Insurance Solutions to Reduce Your Risk

Require Contractors to Have Their Own GL Insurance

Many industries mandate that independent contractors carry general liability insurance. Ensuring contractors have their own policies means any claims arising from their work fall under their coverage, not yours.

Ask for Proof of Insurance

Before starting a project, always request a certificate of insurance (COI) from contractors. This step is crucial, as hiring an uninsured contractor can expose your business to considerable risk.

Be Named as an Additional Insured

To extend your protection, require contractors to list your business as an additional insured on their policy. This enhances your coverage and mitigates potential risks tied to their work.

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

An OCP policy, purchased by the contractor but providing liability protection for your business, serves as primary coverage against contractor-related claims.

Use a Well-Drafted Contract to Clarify Insurance Responsibilities

It's crucial to articulate insurance obligations and liability responsibilities within contractual agreements. A clear contract helps avoid disputes and ensures both parties understand their coverage roles. Businesses must prioritize verifying proper insurance coverage when hiring independent contractors. Without these precautions, they could shoulder financial responsibility for claims. Conducting a thorough risk assessment of existing contractor policies is a proactive step toward safeguarding your business.