Do IT Companies Need Subcontractor Insurance Coverage?
Dan Levenson August 18, 2016
When you think about subcontractors needing insurance, you might picture someone working on something that is more of a physical labor job—for instance, a plumber or even a landscaper that comes to do work on behalf of your company.
While those subcontractors are important, what about your tech subcontractors?
When hiring out subcontractors to help complete certain jobs, there is quite a bit that you need to know about insurance requirements and how they protect your business, as well as the subcontractors themselves.
These requirements are there to protect you, but it is also the law in New Jersey. Those who are hired out, such as IT contractors or consultants, fall under this blanket sector of subcontractors and are included in your insurance needs.
General Liability Information and Common Mistakes
If a technical worker (or any worker, for that matter) causes damage at a place of business and they happen to be a subcontractor that you have hired out, you may be under the impression that your general liability insurance will cover this.
However, this is not always the case.
In fact, some general liability insurance policies specifically exclude subcontractors from coverage. If your tech support contractor drops your client’s computer equipment or ruins a customer’s server, you are not necessarily covered.
In the state of New Jersey, general liability insurance is required for all subcontractors. This means that if you hire out subcontractors, you are required to carry this type of subcontractor insurance coverage. General liability protects a variety of things including your clients and your own business when it comes to injuries or property damage.
Of course, it never hurts to have additional policies in place.
Professional Liability Insurance (E&O)
You might consider professional liability insurance, also known as E&O or errors and omissions coverage. This covers your business in case you are sued due to negligence from a worker.
In fact, this is one of the most important kinds of subcontractor insurance for tech companies to have because of the high cost of defending negligence claims, which may involve claims regarding misuse of client data, software malfunction, or system failure.
What About Injuries?
An injury on the job is another area that is equally, if not more important when it comes to subcontractors. With your employees, you are required to have workers’ compensation. But if your IT contractors, consultants, or subcontractors are not covered by insurance as well, you open up your company to damages that can run into the hundreds of thousands if there is any injury.
For instance, a subcontractor is at a client’s place a business and slips and falls. His injury is serious enough for medical attention, and when the injured party cannot collect from his employer, the place where he was injured is the obvious choice.
If your company is not specifically paying premiums that cover subcontractors, then your workers’ compensation policy is not going to cover it and any costs incurred will come out of your own pocket without general liability insurance.
Excess Liability Insurance
Another thing to consider if you use technical subcontractors on a regular basis is excess liability insurance. This is insurance that kicks in if the general liability insurance payments are exhausted.
It’s not a requirement by law, but it is something to think about if you have the means to add it. It’s better to be covered too much than not covered enough when the need arises.
There are other types of subcontractor insurances such as tools coverage and auto coverage, but the most important thing to have is general liability insurance. Yes, it is required by New Jersey law, but it is also there to protect your company as the subcontractor and makes sure that no one has unnecessary expenses that they cannot afford to pay.