Independent Contractors Limitation Coverage - Whose interest does it protect?

It’s amazing how few business owners "main contractor" aka "General Contractor" understand whose interest is being protected when the "Independent Contractors Limitation of Coverage" endorsement is added to their Commercial General Liability policy.

This endorsement to the main contractor's commercial general liability policy DOES NOT give the subcontractor or vendor coverage and rights under the main contractor's "Name Insured" policy. This endorsement will only protect the main contractor's "Name Insured" interests in the event of a future claim, demand or suit arising out of operations performed for the main contractor aka "General Contactrctor" by an independent contractor or vendor aka "Subcontractor".

The main contractor's sub-contractor or vendor should obtain their own coverage equal to or broader than the insurance maintained by the main contractor. If the sub-contractor or vendor is uninsured, then the main contractor is left with the full exposure of said claim, demand or suit. In addition, the main contractor's premium rates will increase. On the other hand, the uninsured sub-contractor is exposed to a claim, demand or suit with no financial recourse to defend or pay same, which may ultimately cause a financial hardship and cripple the sub-contractor's operation.

Main contractors should be aware that there are conditions for coverage of independent contractors outlined in the carrier's commercial general liability endorsement that they should review.

It is highly recommended that the main contractor verify the following information prior to allowing a sub-contractor to perform any operations for them. Following these simple steps will minimize your exposure to any claim, demand or suit arising out of operations performed for the main contractor by the independent contractor.

• Obtain a signed written contract with any and all independent contractors which should include hold harmless and indemnification clauses in your favor for all liabilities resulting from or arising out of the operations of the independent contractors.
• Verify that all indepedent contractors have Commercial General Liability coverage equal to or broader that then coverages provided by the main contractor's policy.
• Obtain Certificates of Insurance from all independent contractors providing evidence of limits of liability equal to or greater than the coverages provided by the main contractor's policy.
• Listing the main contractor as an additional insured on the sub-contractor's Commercial General Liability policy.

NOTE: The same recommendation applies when the main contractor also has Workers' Compensation, Commercial Auto and any additional business insurance.