As part of ongoing risk management for your business, it is recommended that confirmation of the following insurance types is obtained from all contractors on an annual basis:
- Workers Compensation Insurance and/or Personal Accident Insurance
- Liability Insurance
- Professional Indemnity Insurance (if applicable)
It is important that contractors have the appropriate insurance in place. They are individual legal entities (whether they are sole traders or incorporated companies) in their own right and most liability policies held by a business owner will not extend to cover their liability. It is a horrible experience for anyone to be left facing huge legal and insurance claim bills without the protection of insurance. So, if you’re a contractor starting a new business, you must get the right insurance advice and the right cover.
Workers Compensation Insurance or Personal Accident Insurance
The personal injury of contractors is very important as a business owner. If the contractor is a company, then the appropriate Workers Compensation Insurance must be in place to cover all employees. If a sole trader, then Personal Accident Insurance will provide cover for the individual or an Income Protection Insurance Policy. In the event that a contractor is injured whilst working under your direction, your liability insurance may be exposed to claims relating to their personal injury if the correct insurance is not in place.
In the event that a contractor is negligent and causes third party property damage or personal injury whilst working under your direction, your business will be exposed to claims. Under most insurance policies the insurer has the right to recover a loss from the negligent party. In the absence of adequate insurance by the contractor, a loss may be unrecoverable by the insurance company and this can affect your claims history.
Professional Indemnity Insurance
Where a contractor provides a service for a fee; Professional Indemnity Insurance should be in force. If a consultant causes third party personal injury or property damage arising from their services, it is most likely not covered under their liability insurance policy. Most (if not all) standard liability insurance policies exclude claims arising from professional services, being Professional Indemnity Insurance Risk. As noted above under Liability Insurance, in absence of insurance being in place your policy may be exposed to unrecoverable losses.
Obtaining Insurance Certificates from Contractors
Obtaining insurance certificates from contractors is good risk management. It is recommended that a system be implemented to obtain current insurance certificates from contractors prior to their policy expiring to ensure they maintain current and appropriate insurances.
Disclaimer – “This material contains general information only and may not suit your particular circumstances. To decide if a policy is right for you please carefully read the relevant Product Disclosure Statement (PDS) and/or Policy wording. While we have exercised due care and skill in preparing this information, Optimum Insurance Services (Optimum) does not accept any legal responsibility or liability for negligence or otherwise to you or anyone else who seeks to rely on this information. This includes, without limitation, loss arising from a possible failure of the information to comply with statutory or regulatory requirements or the failure of the information to identify other terms and conditions beyond those considered in this document. You should obtain advice to ensure that your policy provides adequate cover for your circumstances.
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