Do you know whether your 1099 contractors or subcontractors are increasing your risk exposures? Is their work covered by your general liability insurance and/or professional liability policy?
There was a time when the terms “contractor” or “subcontractor” were only relevant to construction-related industries – but in today’s gig economy, these terms are increasingly describing a major cross-section of the American workforce: “independent contractors.”
According to the January 2018 NPR/Marist Poll, one in five jobs is being conducted on a contract basis, and NPR reports that “within a decade, contractors and freelancers could make up half of the American workforce.” So, what does that mean for your business, your risk exposures, and your commercial insurance policies?
Ask Yourself: Are Contract Workers Covered by Our General Liability Insurance?
Many business owners and executives operate with the belief that their company’s work is covered by their general liability insurance – regardless of whether those who completed the work were classified as “employees” or not. And many business owners and executives would be mistaken.
There’s a growing trend towards reducing carrier costs by excluding coverage for work performed by subcontractors. It stems from the idea that 1099 workers (regardless of whether you call them subcontractors or independent contractors) are their own business entities and therefore should be required to carry their own coverage. While this may seem rather straightforward when thinking about the electrical engineering firm that consults for you sometimes, it’s less cut-and-dry when you consider the independent graphic designer that’s helping your team.
As with most things in life, the answer to whether your 1099 workers are covered by your general liability insurance depends on the details of your specific policy, so it’s important to contact your agent and ask about your coverage.
Ask Yourself: What Other Insurance Risks Should I Consider?
In addition to understanding the impact independent contractors have on your general liability insurance coverage, you should also consider risk exposures relating to your professional liability coverage and your workers’ compensation coverage.
Consider these examples:
Imagine being an attorney who contracts an accountant because you need help reviewing very complicated financial documents for a case. If that accountant provides inaccurate information and it damages your client, you could be held liable and your professional liability insurance may not cover the damages.
Now, envision yourself as a general contractor who’s hired a company to put the finishing coat of paint on a nearly completed project. If one of their workers falls while on-site and the subcontractor is uninsured, you may find yourself being sued by the injured worker – and you may have difficulty getting your workers’ compensation insurance to cover it.
The key to minimizing risk exposures is proper planning. If you hire 1099 workers, it’s important to speak to a commercial insurance expert about your coverage options. You should also consider requiring all of your independent contractors and subcontractors to carry their own coverage.
You Have Questions – We Have Answers
At Swarts, Manning & Associates, we provide a unique perspective on all of your commercial coverage options, and we help to determine which carrier best fits your business needs. We strive to find you the broadest coverage at the best available rate. Give us a call to get started: (833) 878-2820.
Each week, Swarts, Manning & Associates covers relevant topics for your business. Stay tuned to hear more discussions about managing your insurance and industry-specific tips.
