Contingent Liability Insurance
Contingent liability insurance is a type of insurance that is purchased by the carrier or shipment company that is hiring truck drivers to move their product. This type of insurance protects the company in the event that the owner-operator files a worker’s compensation claim against the carrier because they saw themselves as an employee and not a contractor. Contingent liability insurance protects the carrier and will cover any claim that is successfully made against the company.
Understanding Contingent Liability Insurance
When a business has employees, it must carry Worker’s Compensation Insurance to protect the employees in the event of an accident or injury. Worker’s Comp policies, however, do not cover contracted or freelance employees.
When a carrier hires an independent driver to move their product, for all intents and purposes, it is under the contract worker or freelance status. These drivers do not enjoy the same benefits or privileges that the other employees of the company enjoy.
However, if the independent driver believes that they are an employee or can show that all of their income comes from this one company, they may be able to have themselves classified as an employee.
When this happens, and they are injured at work, the Worker’s Compensation policy will not cover their injury and losses. This means that the driver will sue the company itself for damages. Companies with contingent liability insurance policies in place can rely on the policy to cover these damages instead of having to worry about being sued.
Is Contingent Liability Insurance Mandatory?
Contingent liability insurance is not mandatory, but it is recommended. This is the one way you can easily protect your company from being sued by a driver who has “proven” they are an employee.
To be considered an independent contractor, the driver must meet the following criteria:
• Uses their own truck and tools to move shipments for carriers
• Has profits and losses from their work
• Has a business license
• Sets their own schedule
The driver must meet all four of these qualifications to be considered an independent contractor. Sadly, it is the last item on the list that often catches the carrier off guard.
If you hire an independent driver and tell them they must pick up the loads every day at 9 am and have them delivered by 5 pm, as an example, you are setting their schedule. Since you are determining the schedule, they can be considered an employee by proxy. That is why this insurance offers you so much protection. Something that simple can mean the difference between being covered or being sued.
If you are wondering how often this can happen to a carrier, the answer is more often than you think. In 2014 FedEx was sued by over 2,400 drivers who wanted to be considered employees instead of contractors. They won the case, which resulted in FedEx having to pay out many millions of dollars in benefits.
Speak With VMC Trucking Insurance
If you are interested in purchasing a contingent liability policy for your company, you are encouraged to speak with VMC Trucking Insurance. We offer policies for carriers as well as for drivers. Our knowledgeable staff can help you select the right policies that will provide you with the most protection.
VMC Trucking Insurance is an Illinois based insurance company but offers policies in AL, AZ, CA, CO, DE, FL, GA, IA, IN, LA, MD, MN, MT, NC, NV, NJ, OH, OK, OR, PA, SC, TX, VA, VT, WA, and WI. VMC Trucking Insurance has been actively writing policies for over five years and works with over 50 carriers. Call today to see how we can help you.