It’s really the nature of the business in construction.  Whether you are a brick mason, a carpenter, a painter, a plumber , or even a landscaper , from time to time you will find yourself in the position of  needing to hire a subcontractor.  But how you define an independent contractor and the way the law and the insurance industry define this term might be very different.  It is important for you to get this right, not only for your workers compensation and general liability insurance , but also for the protection of your business and perhaps your personal assets.  And here is a clue – you don’t get yourself off the hook simply by providing a 1099 instead of a W2.

It is very important that you handle the interaction of your general liability insurance policy and your workers compensation insurance policy with your subcontractors.  I have covered strategies of this type in previous blogs, whether it be the impact on your insurance audits, or the increased risks that subcontractors add to your business.  This article is not intended to tackle those areas.  Instead, here I want to really focus on the definition of an independent contractor so that you don’t make the mistake of treating an employee as an independent contractor and increase your business risks as a result.

While there is no clear basis for making the determination of who is an employee and who is an independent contractor in the eyes of the law, here are a few relevant factors that you should consider.

Who sets the hours of work?  If the employer does, then it is more likely that the worker will be determined to be an employee.  Does the employer provide training for the job?  If so, this points more to an employer/employee relationship.  Is the worker paid by the job, or paid by the hour.  Hourly workers are much more likely to be viewed as employees.  Can the person work for more than one firm at a time?  If not, perhaps they are really an employee.  Who furnishes the tools or materials needed for the job?  If it is your company, then you may be dealing with an employee, rather than an independent contractor.  Is the work part of the regular business of the employer?  This one seems a bit vague but if you are hiring people to do the regular and usual work of your company, then they are most likely employees.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping all types of construction contractors with their general liability insurance, workers compensation insurance and all other business insurance needs.  We want our contractors to be informed consumer and help them run their business using best practices that help reduce risks to their assets.  If you are in the construction business and would like help with your business insurance needs, please visit us on the web at www.TheContractorsHelper.com, or call us, toll free at 877-687-7557.

Used car dealers insurance is a specialized coverage and few agents understand it. So how many used car dealers are getting it wrong when it comes to drives other car coverage? The answer is most all of them. If you are a used car dealer and you operate as a corporation, partnership or LLC, you might be leaving yourself open to a huge exposure if you haven’t tackled the drives other car coverage.

Drives other car coverage is simply an endorsement that you can add to your garage liability policy to extend coverage for you individually to the cars that you may drive that you don’t own or that you rent. Almost every personal auto policy in almost every state provides this protection automatically. And the garage policy does as well if you have symbol 21 on that policy. For more information about the garage symbols and what they means, click here.

So what is the problem? The problem is that this protection for hired and non owned vehicles is extended to the named insured, not the driver. So, if your dealers insurance policy is written in the name of your corporation, or your LLC or partnership, then this coverage is only extended to that entity and not to you as an individual. Perhaps an example will help explain the real risk and pull back the veil a bit on this DOC mystery.

Let’s say you are a used car dealer and your garage insurance policy is written in the name of your corporation, Joe’ Used Car, Inc. Because you always drive a car with the dealer tag on it, you don’t worry about purchasing a personal auto insurance policy. Now, let’s say one day you need to borrow your neighbor’s car and while doing so you are involved in an accident that is your fault. Assume the costs of this accident are $100,000 and your neighbor only carries $50,000 coverage on his personal auto insurance policy. Now if you had your own personal auto insurance policy then that policy would step up and provide the excess coverage of $50,000 that you need personally for this accident. And, your garage policy will do this also, but, only in regards to protecting the named insured on that garage policy which is Joe’s Used Cars, Inc, not you.

This scenario gets even worse if your neighbor had let his auto insurance lapse because he forgot to pay his bill. Now you are on the hook for the full $100,000. And that would be a very nasty surprise for you.

So what is the solution? Well, you can purchase DOC coverage. DOC stands for Drives Other Cars. This will name you as the individual protected by this endorsement and will extend the coverage of your garage insurance to you individually for cars that you drive that you do not own or that you rent. Now, the odds of needing this protection are in some ways, admittedly long odds. But the cost of the protection is pretty low and the uncovered loss could be enough to bankrupt you. So, if you don’t have a personal auto policy in your name, and your garage policy is in a business name, take a moment to check your policy to be sure that you have purchased DOC protection.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping used car dealers in NC, SC, GA, VA and TN. We want all of our dealers to be informed consumers. If you need help with your used car dealers insurance, or if you just want to speak with an agent that specializes in your business, please give us a call, toll free, at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.