You had the flu, so you sent your trusted backup. The backup slept through her phone ringing. The dad had to deliver the baby alone in panic. The family is suing you for breach of contract and negligence because they paid you. You think, “It’s not my fault!” Legally, it might be.
Key Takeaways
- Vicarious Liability: If you pay the backup (subcontractor), you are liable for their errors. The client’s contract is with you.
- The “Insured” Definition: Does your policy cover “employees and contractors”? Most individual policies cover only you.
- Breach of Contract: This isn’t always a malpractice claim; it’s often a contract dispute. Malpractice insurance rarely covers contract disputes (refunds/damages).
- Vetting is Your Duty: If you hired a backup with no insurance, you are on the hook for everything.
The “Why” (The Trap): Independent Contractor vs. Employee
If you simply hand the client off and they pay the backup directly, you are usually safe. But if you keep the money and pay the backup a cut, you have created an agency relationship.
The Trap: Your policy likely says “Named Insured: [Your Name].” It does not automatically extend to people you hire. If the backup messes up, the parents sue you. Your insurance says, “We insure your actions, not hers,” and denies the claim.
[IMAGE: Flowchart: “Who Pays?” showing the flow of liability from Backup to Business Owner]
The Investigation: I Called Them
I asked carriers how to cover a backup arrangement.
CM&F Group
- The Solution: They allow you to add employees, but for independent contractors, they recommend the contractor carries their own insurance.
- Crucial Detail: You need to be listed as an “Additional Insured” on your backup’s policy.
Hiscox
- The Solution: You can buy “Hired and Non-Owned” coverage or add a specific endorsement for subcontractors.
Comparison Table
Structuring your backup protection.
| Arrangement | Who Gets Sued? | Insurance Needed |
| Referral Only (Client pays Backup) | Backup | Backup needs own policy. |
| Subcontractor (You pay Backup) | YOU + Backup | You need “Vicarious Liability” + Backup needs own policy. |
| Agency Model (You employ Backup) | YOU | Corporate Policy covering all staff. |
Step-by-Step Action Plan
- Require Proof of Insurance: Never use a backup who doesn’t have their own active malpractice policy. Get a copy of their Declarations page every year.
- Get “Additional Insured” Status: Ask your backup to add your name/LLC to their policy as an “Additional Insured.” This costs them nothing usually, but it protects you if they get sued.
- Update Your Contract: Explicitly state: “In the event a backup is utilized, the backup is an independent contractor and is solely responsible for their services.” (Check with a lawyer; this doesn’t always hold up, but it helps).
- Transfer the Contract: The safest legal route is to have the client sign a new agreement with the backup if you can’t attend.
FAQ
Q: Can I just refund the money to stop the lawsuit?
A: Sometimes. But if they claim “trauma” from your absence, a refund won’t stop a lawsuit for damages. Never offer a refund with a “Release of Liability” waiver without a lawyer drafting it.
Q: Does my LLC protect my personal house?
A: Yes, if run correctly. But if you are personally negligent (e.g., you chose a known unreliable backup), they can sometimes “pierce the corporate veil.” Insurance is your first line of defense; the LLC is the second.