Small Business Owners – Ensure that Your Subcontractors Carry Their Own Insurance Policies

If you face a claim related to work done by your subcontractor, you don’t want to find out too late that your insurance policy won’t pay. If you’re hiring independent contractors, it pays to know in advance whether your business insurance policies provide coverage for them or the work they do.

General Liability

If you carry general liability insurance for your company, alone or as part of a Business Owner’s Policy or BOP, you may assume that any personal injury or property damage involving any work done by your company would be covered. But if that work is done by a subcontractor on your behalf, beware: it may not be.

In policies offered by some insurance companies, damage caused by your independent contractor while representing your company on the job is excluded from your general liability coverage. So, if your subcontractor accidentally drops your client’s server, the client could go after the subcontractor for damages. But if that fails, you’re the one who will be held financially accountable.

That’s why many small companies won’t work with subcontractors unless they carry their own general liability insurance. How can you be sure your subcontractor is insured? First, require it in their contract. Second, ask to see proof of coverage, typically in the form of a Certificate of Insurance. It is also a good idea to require that your subcontractor name your company as an “Additional Insured” on their