Given that the cost of an employee is typically higher than that of an independent contractor, it makes sense that business owners would like as many of the people that participate in the business operations as possible to be independent contractors.<\/p>\n
I’ve already addressed how it is tempting but not worth it to improperly class employees as independent contractors, here<\/a> and here<\/a> so I’m not going to beat that drum today.<\/p>\n Instead what I want to talk about are\u00a0the proper steps to take when you do have a legitimate independent contractor or subcontractor (I will henceforth refer to them as IC\/Subs). \u00a0Why follow proper steps? Because doing so\u00a0will keep your insurance companies happy.<\/p>\n Why care about keeping\u00a0insurance companies happy? \u00a0Because if they are not happy, they will 1) charge you more premium and\/or 2) cancel you. \u00a0And once one insurance company is unhappy with you, they all tend to be unhappy with you. \u00a0It’s like all the insurance companies go to the same parties and talk about you….<\/p>\n Let’s assume you’re a contractor that specializes in remodeling residential kitchens. \u00a0You and your crew do most of the work, but you use subcontractors for all electrical work. \u00a0Let’s also assume that it is clear that your electrician\u00a0meets all the qualifications of a subcontractor as dictated by the state of California<\/a>. \u00a0 All is good, right? \u00a0Almost, but not quite.<\/p>\n You now need to follow\u00a0three steps:<\/p>\n To go back to the example above, it is the electrician that needs to have $1,000,000 worth of insurance and list the kitchen remodeler as an additional insured on its General Liability policy.<\/p>\n Some of you might be thinking, “I see why this makes insurance companies happy – they’re selling more policies.”<\/p>\n I hear you, but that’s not why they do it. \u00a0The reason is because when an IC\/Sub has its own insurance, it removes all doubt\u00a0as to whether your insurance company will have to pay a claim on the IC\/Sub’s behalf. \u00a0You see, you could go through all the steps to make sure an IC\/Sub\u00a0is really an IC\/Sub and not an employee, but if an accident happens and the IC\/Sub doesn’t have his own insurance, the injured party (which may be the IC\/Sub’s own employee) will look for coverage somewhere, and lawyers are really good at creating ambiguity about whether the IC\/Sub was really acting in the capacity of an IC\/Sub or an employee in that particular situation when the\u00a0loss occurred. \u00a0This would cause your insurance company to pay a lot of money in defense costs just to prove that they are not supposed to pay the actual claim.<\/p>\n Because insurance companies expect that they will have to pay at least\u00a0defense costs in these situations, in a final audit, they will charge you the premium as if the IC\/Sub is your employee, and then they will\u00a0likely set your policy up for non-renewal until you start sending copies of Certificates of Insurance as described above and\/or verify that you will never use an uninsured IC\/Sub ever again. \u00a0It is so important for insurance companies, that they will often require that you promise to follow these steps before even offering a quote!<\/p>\n So for the sake of keeping your costs down, preventing your insurance from paying a claim when it should not, and preventing your policy from getting cancelled or non-renewed; don\u2019t use uninsured IC\/Subs and follow the steps above.<\/p>\n \n","protected":false},"excerpt":{"rendered":" Most businesses have people that help move their enterprise […]<\/p>\n","protected":false},"author":3,"featured_media":3493,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,20,17,7,11,13],"tags":[2,19,16,18,10,14],"class_list":["post-2411","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-insurance","category-contractors","category-general-liability","category-liability-insurance","category-wineries","category-workers-compensation","tag-business-insurance","tag-contractors","tag-general-liability","tag-liability-insurance","tag-wineries","tag-workers-compensation"],"_links":{"self":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/2411","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/comments?post=2411"}],"version-history":[{"count":1,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/2411\/revisions"}],"predecessor-version":[{"id":44624,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/2411\/revisions\/44624"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/media\/3493"}],"wp:attachment":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/media?parent=2411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/categories?post=2411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/tags?post=2411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n