Do you assume that because you are using independent subcontractors that you are insulated for most, if not all, of the wrong doings of the independent subcontractors you hire?
You may find that your independent subs are not as independent as you think in the eyes of the courts and that your independent subcontractor is, in fact, an employee.
It is extremely important for businesses to understand that when there is a catastrophic accident, large medical expenses and lawsuits are almost a given in today’s litigious environment and the search for deep pockets by attorneys of injured parties are sure to follow. If, after an accident, your independent sub contractor is found to be an employee, you could be responsible have to pay out of pocket for Worker Compensation benefits such as lost pay and medical expenses and incur lawsuit expenses such as defense cost, settlements and judgments.
This is why it is so important to understand if you independent subcontractor could be classified as an employee and take the proper risk management steps to protect your business.
To better determine if your subcontractors could be classified as an employee, I recommend that you read Cary Christian’s article “Employee vs. Subcontractor Issues” by going to http://www.peakconsultinginc.com/Articles/employee_vs_independent_contract.htm.
Under most state laws, when there is liability for an auto accident the order of responsibility to pay is as follows:
- The owner of the vehicle (possibly uninsured or underinsured).
- The driver of the vehicle (possibly uninsured or underinsured).
- The organization or business that was responsible for the driver or owner of the vehicle being on the road at the time of the accident.
Two risk management tools I recommend is to 1) have all your subcontractors carry at least $1,000,000 minimum limits of liability on their auto policy so there is enough money to satisfy the judgment in the event of a lawsuit and have the sub provide you a Certificate of Insurance as proof of coverage and 2) always carry Hired & Non-Owned Auto Liability with a minimum $1,000,000 limits on your General Liability or Business Auto policy. Hired & Non-Owned Auto Liability will provide the needed liability coverage to help your business survive; in the event your independent subcontractor is classified as an employee.