Whether you work with contractors regularly or only occasionally, it’s important to understand how that relationship impacts liability in various situations.
When you’re dealing with a mistake made by a contractor that has led to a lawsuit, or with an injury to a contractor that occurred while they were working on your jobsite, you need to know your insurance will protect you, and that means understanding how various business policies that you have relate to the hiring of contractors.
Proper Classifications
The first thing you need to do is make sure that all of your employees, including contractors, are properly classified. This eliminates the possibility that a person who you considered to be working on a contract basis would actually be classified as an employee for certain insurance purposes. It also ensures that your premiums are properly calibrated based on the level of risk each employee is subject to, and that every task they carry out will technically be within their job description.
Worker’s Compensation
For the purpose of worker’s compensation claims, many states treat contractors as employees, meaning that their claim for an injury that occurred on your property or while working for you would be covered under your worker’s comp insurance. The only way around this is for the contractor to have their own worker’s comp policy, and so you may want to consider hiring only contractors with their own coverage.
This is especially important if you have no employees or few enough that your state doesn’t require you to carry worker’s compensation insurance yourself. If you hire a contractor without their own policy and you don’t have coverage either, your company could still be held liable if they are injured on the job.
No matter who is ultimately responsible for a potential worker’s compensation claim, though, it’s essential that you make sure contractors are well-versed in your company’s safety policies and procedures, and that they follow them any time they are working for you or on one of your job sites.
Other Liability and Indemnification
The other area to be concerned with when dealing with contractors is liability in the event that they make a mistake or cause damage while working on a job for you. The best way to protect yourself in this type of situation is to formalize your agreement through a written contract that includes an indemnification provision passing liability from you to the contractor. This type of clause stipulates that the contractor will pay any judgement against you if you are sued as a result of their actions while working for you.
In your agreements with individual contractors, you may also want to specifically require that they carry their own general liability insurance, worker’s compensation, and any other type of coverage that may apply to the specific situation or job that you’re hiring them for. Even for small jobs, it’s better to be protected than to leave things up to chance, and a small opening can quickly turn into a large financial obligation in the event of an accident or injury.
To learn more about the various types of business insurance policies we offer and the ways we can help you protect your company, contact our offices today.
