Using independent contractors is common practice in the bed and breakfast industry. Independent contractors fill in as bartenders, caterers, cleaning services and massage therapists.
What are the consequences of a bartender that serves one drink too many, the caterer who serves bad fish, the maid falling down the stairs or the massage therapist who injures a guest, or worse, is accused sexual inappropriateness?
You didn’t serve the one drink too many, you didn’t serve the bad fish and for that matter the fish wasn’t even your idea, the maid isn’t your responsibility (she/he is not your employee) and you weren’t in the room when the therapist allegedly “messed up”.
Can you be held financially responsible for the actions, inactions or an injury of an independent contractor? We live in a litigious world, and unfortunately, the answer is yes.
For most of us it would be unrealistic to operate our business without the use of independent contractors. You can take measures to protect your business. The following three steps will help in minimizing your risk.
First, choose carefully. How well do you know the independent contractor?
- How long have they been in business?
- Do they come recommended from someone you trust?
- Have you checked references?
- Is it worth doing a Google search for reviews, news, or other web presence?
- Do they need and/or have a valid license or other certifications such as current Training for Intervention Procedure (TIP) certificate?
Knowing the independent contractor is good at what they do and that they do it with honesty and integrity is the foundation to minimizing your risk.
Second, require your independent contractors to have minimum levels of liability and workers’ compensation coverage. Keep in mind the insurance policy will pay up to the policy limit. When the limit is exhausted, you will be next in line.
Third, it is critical that you require the independent contractor to list you as an additional insured on their liability policy. Additional insured status gives you the rights to the contractor’s coverage in the event the claimant names you as a negligent party. You are providing an opportunity for the independent contractor to make a living, and as such, the contractor should be willing and able to help with the risk.
The following chart summarizes the minimum limit of liability coverage as well as recommendations as to whether or not require the independent contractor carry an umbrella or excess liability policy, list your business as an additional insured and carry workers’ comp insurance.
Taking these steps with your independent contractors will help ensure that your assets are protected and give you peace of mind!
Mitch Pies owns and operates the Mitchell J. Pies Insurance Company in Ballwin, Missouri, specializing in serving owners in the Lodge, Bed and Breakfast and Resort industry.
The opinions expressed above are meant for educational purposes and do not constitute legal advice.