I was working 40 hours a week for a client, sitting in their office, using their laptop. I felt like an employee. But my contract said “Independent Contractor.” When I accidentally deleted a production database, the client’s insurance company said, “He’s not an employee, we don’t cover him.” Then the client sued me.
Key Takeaways
- The “Insured” Definition: Commercial insurance covers employees. It specifically excludes independent contractors unless endorsed.
- Subrogation Target: The client’s insurance pays the client for the data loss, then sues you to get their money back because you are a “third party.”
- Additional Insured: Even if the client adds you as an “Additional Insured” on their GL, it often doesn’t apply to Professional Liability.
- You need your own policy: Always.
The “Why”: The Separation of Insureds
The Trap:
- Client’s View: “He’s on the team.”
- Client’s Insurer View: “He is a vendor. If he causes a loss, we will recover the funds from his insurance.”
If you don’t have insurance, they will garnish your personal assets. You are not protected by the corporate veil of the client.
The Investigation: I Quoted 3 Major Carriers
1. Thimble
- My Analysis: Perfect for staff aug. You can buy a policy for the duration of the contract (e.g., 6 months). It covers your liability as a separate entity.
2. Next Insurance
- My Analysis: Good for getting a quick Certificate of Insurance (COI) to show the client. It proves you are insured, which stops them from worrying about misclassification.
3. Geico (Broker)
- My Analysis: They can broker a Hiscox policy. Standard stuff.
[IMAGE: Diagram showing “Employee” vs “Contractor” insurance coverage bubbles]
Comparison Table: Staff Aug Liability
| Carrier | Flexible Terms? | Monthly Billing? | Best For… |
| Thimble | Yes (By Job) | Yes | Short Contracts |
| Next | No (Annual/Monthly) | Yes | Long Term |
| Geico | Variable | Yes | Standard |
Step-by-Step Action Plan
- Get a COI: Buy your own E&O / GL policy ($50/mo).
- Send it to Client: “Here is proof of my insurance.” This establishes you as a professional business.
- Check Contract: Ensure the contract says “Contractor shall maintain insurance.”
- Waiver of Subrogation: Ask your agent to add a “Waiver of Subrogation” in favor of the client. This prevents your insurance from suing the client if they mess up (and vice versa).
FAQ
Can I be added to their policy?
Usually no. E&O is specific to the entity providing the service.
Am I covered by their Workers Comp?
No. If you get hurt, you pay. You need your own health/disability insurance.
What if I use their laptop?
Liability is about your actions, not the hardware. You are still liable.