Just like any other business, a subcontractor faces different types of liability risks in their everyday operations. They need general liability insurance for financial loss protection when facing claims or lawsuits arising from issues such as customer injury, property damage, and advertising injury. If you’re wondering whether general liability policies cover independent contractors, read on to learn more.
Your General Liability Insurance Won’t Automatically Cover Subcontractors
The terms of a specific general liability policy determine whether or not a subcontractor is covered. If you’re a general contractor or engaged in any other business, your policy doesn’t necessarily protect any subcontractor working for you. Also, it won’t cover any damage or injury the firm you hired causes to your customers.
Take the example of sub-contracting a tree-care company to maintain your customer’s yard. The gardening expert cuts a tree that accidentally falls on the customer’s roof, causing significant damage. This independent contractor will be held liable for the resultant loss. Unless otherwise indicated in your policy document, your general liability insurance won’t cover such damages.
However, you can add an independent contractor to your policy to give them liability protection.
When Can a Subcontractor Be Held Liable for Damages?
Independent contractors aren’t immune to liability lawsuits. Customers and other parties can hold them liable for damages or losses associated with their work. Without liability protection, these businesses would have to cover attorney fees, settlements, or court judgments out of their own pocket if sued.
Why Does a Subcontractor Need General Liability Insurance?
If you’re an independent contractor, you should get general liability insurance to protect your company against financial loss from liability lawsuits or claims. Here are the main benefits of getting general liability coverage:
- Financial Protection-As an independent contractor, you bear the same legal responsibilities and liability risks as general contractors. A client could sue you for damaging their property or causing bodily injury. Advertising injury and copyright infringement are also common accusations leveled against subcontractors. Liability coverage can pay for legal fees and court-awarded damages from a liability case, protecting your firm from financial loss.
- More Contracts-General contractors or other larger firms may require you to have general liability insurance before giving you any contract work. They just want to avoid bearing liability for bodily injury, damages, or other third-party claims arising from the work you’re doing for their clients.
- State Mandates-Depending on your state law and the kind of work you do, you may need to carry general liability coverage. It may be a licensing requirement for construction firms, for example. Typically, you’re better off obtaining a separate policy from your client’s.
How to Obtain General Liability Coverage
As an independent contractor, you can get your general liability insurance in two ways:
- Buying Your Own Policy-You can obtain your own general liability policy via an insurance agent. This will help you win business much faster when your clients demand proof of coverage. Additionally, most clients want to avoid the extra cost of adding you to their liability coverage. Be sure you’re properly insured and have a certificate of insurance to prove it.
- As an Additional Insured-If, you don’t have adequate insurance, some clients may be willing to add you to their general liability policy. You’ll be protected for the duration of the project or longer. However, this coverage option is typically more expensive for clients.
Both approaches provide liability coverage if your company is sued over third-party bodily injury or property damage. Either option can pay for legal fees, settlements, or judgments against your firm.
Independent contractors aren’t exempt from the need or obligation to have general liability coverage. To learn more about liability insurance policies, contact our experts at Atlas Insurance in Sarasota, FL. We can help customize your business insurance coverage based on your unique needs.