When you’re looking to purchase adequate insurance policies for your business, it’s helpful to know where you stand, amidst the sometimes misunderstood area of contractors and subcontractors. This guide will go into a little bit more detail in an attempt to outline where the liability rests when it comes to damages created by an independent contractor, and what a contractor can do to protect themselves against this liability. At the end of the day, it all boils down to contractors and subcontractors possessing adequate business insurance that works for all parties involved. But, let’s start with an easy one –
What exactly is an independent contractor?
What do we mean when we talk about an independent contractor? An independent contractor can often be referred to as many things. Whether it’s an independent contractor, a sub-contractor or even a freelancer, they all have one thing in common – they’re independent. In a business sense, this means that they aren’t employees of the business they are contracting for and are separate in an insurance sense if any claims are made. They may also have different motivations and skills. A sub-contractor, for instance, is more likely to have a specific skill set, and may be looking to expand their network of clients.
Although the contracting companies can add sub-contractors onto their insurance policy, some of the time it will be a contractual requirement for the sub-contractor to possess their own liability insurance to protect themselves in the face of any claims made against them. And although it is often the case of a smaller business working for a larger business, there are two clear distinctions in subcontract work that need to be made clear. Labour-only subcontractors (LOSCs), although often independent businesses themselves, work under the direction of the main contractor. Therefore, they are treated the same way as employees, from an insurance point of view. Bona-fide subcontractors (BFSCs), on the other hand, are usually hired to perform a duty the contractor cannot. They work independently, usually supply their own materials and tools, and subsequently should have their own insurance.
The result is that contractors need to have adequate insurance for all of their LOSCs, but need to ensure that any BFSCs they hire have their own, up to date public liability insurance, and employers’ liability insurance, if applicable.
Can an independent contractor be held liable for damages?
All independent contractors have the capacity to be liable for damages, but the distinction between LOSCs and BFSCs makes clear where the responsibility lies, in the event of a mistake or injury. Essentially, LOSCs are no longer recognised as independent contractors, from the moment they are in your employment. This means that any third party claims made against an LOSC, of BFSC, will be covered by either the contractor’s insurance policy or that of the BFSC in question.
A fault is determined in the same way as an insurance claim; based on who committed the act in question, and whether was down to negligence, accident, or damage that has led to injury and the propensity for a claim to be made. With this in mind, each contractor should strive to provide all the necessary safety and regulatory equipment and guidelines required for the LOSC to work, and know that any BFSC they hire operates in the same way. Both the contractor, and subcontractor, can both be held liable for damages incurred during a project, but how this process is handled will depend on how each contract is handled, and each subcontractor hired.
Look into the terms written into your contracts
Depending on the relationship between you and your subcontractor, the final decision on liability is a discretionary one that can be detailed in the terms and conditions of the contract between the two parties. However, by understanding the capacity in which you’re hiring (i.e., LOSCs and BFSCs), this will make the process much more straightforward for all parties involved, and you won’t have to dedicate so much time to defining the small print in your terms.
It also means that if a subcontractor only agrees to the work on terms that don’t fit with either type of hire, then you can easily decipher that they are not going to be reasonable to work with.
There is a selection of insurance policies here at Tradesman Saver, perfect for both contractors and individual contractors looking for plumbers insurance. Each policy is designed to give tradespeople the best and most insightful deals on their business insurance within the industry. As we’ve been helping tradespeople with their insurance for a number of years, you’re sure to find a policy here that suits your business, and any subcontracting insurance requirements you’ve identified.
What is independent contractor liability?
Independent contractor insurance is often referred to as general liability insurance. It is an essential type of insurance for subcontractors looking to safeguard their businesses against any potential claims that are made against them while working for other contractors. In addition to the financial benefits that come with possessing this sort of insurance, it will also open up doorways for you to work across new contracts and new customers – as your adequate insurance highlights your business to be reliable and trustworthy.
Hopefully, by now you’ve gained a solid understanding of the different nuances that are involved when it comes to the liability of your subcontractors, freelancers and individual contractors. Whether it’s a business you’ve worked with before or you’re opening a new contract agreement with a new subcontractor, Tradesman Saver is adept at providing a selection of hassle-free insurance services to suit your businesses requirements. Whether you’re a subcontractor looking to acquire your own liability insurance, a contractor looking to add an individual contractor to your current insurance plan, or you’re simply looking for help, Tradesman Saver has the values of the tradesman at the heart of every product and policy.