Do you know if your 1099 contractors or subcontractors are increasing your risk exposure? Are their actions covered by your general liability or professional liability insurance policies?
In today’s gig economy, “independent contractors” play a significant role in the workforce. According to a January 2018 NPR/Marist Poll, one in five jobs is contract-based, and projections suggest that within a decade, contractors and freelancers could make up half of the American workforce. What does this mean for your business, your risk exposure, and your insurance coverage?
Ask Yourself: Are Contract Workers Covered by Our General Liability Insurance?
Many business owners assume their general liability insurance automatically covers work performed by 1099 contractors. However, this is not always the case.
Increasingly, insurance carriers are excluding coverage for subcontractor work, reasoning that 1099 workers operate as their own businesses and should carry their own insurance. While this makes sense for larger contractors, like an engineering firm, it’s less clear when applied to smaller roles, such as a freelance graphic designer.
Coverage details vary by policy, so it’s critical to consult your agent and confirm whether your 1099 contractors are covered under your general liability insurance.
Ask Yourself: What Other Insurance Risks Should I Consider?
In addition to your general liability insurance, consider the potential gaps in professional liability and workers’ compensation coverage for independent contractors.
- Professional Liability Risks:
- Example: An attorney hires an accountant to review financial documents for a case. If the accountant provides inaccurate information, causing harm to the client, the attorney may be held liable—and professional liability insurance may not cover the damages.
- Workers’ Compensation Risks:
Example: A general contractor hires a painting company for a project. If an uninsured subcontractor’s employee is injured on-site, the general contractor could face a lawsuit and challenges getting workers’ compensation to cover the claim.
Requiring independent contractors to carry their own insurance can help mitigate these risks.
Minimizing Risk with Proper Planning
If you work with 1099 contractors, plan ahead to minimize potential exposures:
- Speak with a commercial insurance expert to review your coverage options.
- Require all independent contractors to carry their own general liability and workers’ compensation policies.
You Have Questions – We Have Answers
At Swarts, Manning & Associates, we offer a unique perspective on commercial insurance coverage, helping businesses identify the best options for their needs. Contact us today for a complimentary consultation at (833) 878-2820.
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