Workers Compensation And Liability Insurance For A Self-employed Person With No Employees

[darvell]

I have been a self-employed technical writer for over 20 years. One of my regular clients has just decided to require that all contractors(including independent consultants and freelancers with no employees) carry workers compensation insurance(even if they are not legally required to) and also commercial general liability insurance. I do all work for this client in my own home, and no employee of this client ever comes to my home. This client accounts for less than 20% of my work, on average. I have no employees, have never subcontracted any work for any client, and never intend to.(In fact, most of my contracts contain a clause forbidding me to subcontract, because I am hired for my specialized skills.) I easily meet tests for independent contractor(vs. employee) status. I told the client that I would not acquire the insurance(which would end our 10-year relationship), but the client offered to pay for it in order to continue to use my services. The client says that no exceptions to this new requirement can be made for any contractor, regardless of the nature of the work or other circumstances. Most of my other contracts include a "hold harmless" clause, but this apparently will not satisfy this client.

My insurance agent says that no private insurer would be willing to write a workers compensation policy for someone in my situation, but that I might be able to get a policy through the State. My reading of my State's workers compensation statute indicates that even if I had such coverage, it would not protect my client from my filing a "third-party" lawsuit if the client's negligence led to my injury(which is what the client is trying to protect itself against). The insurance agent suggested that I might be able to obtain what he called a "ghost policy"(by which I think he means what is also called an "if any" policy), but that even if this satisfied the client's requirement for a COI, it would not cover me in the event of a work-related accident(it would only cover any employees I might hire, which, of course, I will never do). In fact, it seems to me that acquiring this type of "ghost" policy at my client's expense to cover non-existent risk could even be construed as evidence of an employee relationship. Is my understanding of these cirumstances correct?

Concerning commercial liability insurance, my understanding is that it would cover only any damage I might cause while working on-site at the client's location(which never happens) or any injury to my clients' employees or damage to their property while they are on my premises(which they never are). Given that the risks again are non-existent, would carrying such insurance be of any benefit to either me or my client? And, again, if the client pays for it, could that be construed as evidence of an employer-employee relationship?

[Are]

Aerin;

You are very well versed!! In a nut shell, the company you contract with needs to speak to their own agent or get their agent to talk to yours because you're right, what they're trying to protect themselves from barely exists, but it does exist. Now, you could definitely be covered under a state sponsored workers compensation policy and should you develop say, carpal tunnel syndrome, or an infection from a paper cut, it's job related and therefore, you'd be covered by your workers compensation policy. Without one, if you could prove that the piece of paper in which you cut your hand, had to do with the work you're doing for them, then yes, you could, technically, go after them to have your injury covered. The logic here is that, if it wasn't for the work you were doing for them, you wouldn't have injured yourself. The same logic would apply if let's say you have to race to the local UPS Store to ship something to them overnight and you're trying to get there before they close and you get into a car accident. "Technically", you wouldn't have been driving to the UPS Store, if it wasn't for them and therefore, they're on the hook for your injuries. However, these are extreme examples but I wanted you to see how their concern, however remote, does exist. However, by having them pay for this it may very well be construed as an employer/employee relationship which neither of you wants. With that said, it also may not. The premium would most likely be negligible with the state sponsored plan, so they could "bonus" you the money to pay the premium rather than paying for it out right. Does that make sense? That way, they're not your employer, they gave you a bonus for services provided, what bills you paid with that money was your decision, not theirs. As for the General Liability, you're on the right track here too but there's more to it than what you read. There are 3 coverage parts to a General Liability Policy and what you are referring to is coverage part A, which is Bodily Injury and Property Damage. Coverage part B is Personal and Advertising Injury and this includes "oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; Oral or written publication, in any manner, of material that violates a person's right of privacy; The use of another's advertising idea in your 'advertisement'; or infringing upon another's copyright, trade dress, or slogan in your 'advertisement'." And "Advertisement" means "a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters." So, you might be able to see how this coverage part can apply to you. The last coverage part is C, Medical Payments and this is to cover accidents that occur on a premise that you own or rent. It's basically a "goodwill" coverage, designed to reduce lawsuits. Someone at a grocery store slips and falls, injuring themselves on some spilled juice, this is the coverage that would pay for their resulting injuries. Now all 3 of these are part of a General Liability Policy. You can't purchase one and not the others. And for you, the one coverage area that may or may not ever be beneficial, would be B, Personal and Advertising Injury. If this is the direction they're leaning, or the track they're on, you might be better off finding some sort of Professional Liability Policy. It would provide much more comprehensive coverage for what you do and could even protect anything over the internet, etc... So, if for instance, you wrote a mis-statement in an instruction manual for some electronic equipment and it resulted in a fire, the customer is going to go after the company and they will in turn, go after you. Here's another example. I go to my CPA's office to deliver my tax documents for 2008, I slip and fall and break my leg, his General Liability policy is going to pay for that. If he makes a mistake on my taxes, his Professional Liability policy will pay for that. In the end, a General Liability policy can't hurt you and it's much less expensive than a Professional Liability policy. But, will it give you the coverage you need, if any?? Only you can decide. As with payment of the premium, again, if they bonused it to you some how, rather than paying it outright, that could take care of the potential problem with employer/employee status. And one last comment on the employer/employee relationship, the IRS has guidelines of what is and is not an independent contractor and I don't believe it states anything about providing insurance for the independent contractor as being a violation of those guidelines but you can easily find that on the irs.gov website. Most insurance companies define employee and independent contractor in line with the IRS definition. I hope this has helped answer your question! You are definitely on the right track, there is truly very little exposure to the company here and a simple legal agreement to provide services could take care of the majority of their concerns but you'll have to find some way to convince them of that. If there's anything further I can answer for you, feel free to email me again! Good Luck. Kristen