I landed a $50,000 contract to build a secure customer portal and, to save time, hired a “Senior Developer” on Upwork to handle the authentication module. Three months after launch, the client called screaming—someone had bypassed the login using a hardcoded backdoor credential left by my freelancer. The client isn’t suing the guy in Ukraine; they are suing me for the data breach, the forensic audit, and the reputational damage.
Key Takeaways
- Vicarious Liability: You are legally responsible for the work of anyone you hire. If they mess up, you messed up.
- Subrogation Dead Ends: Your insurance company will pay the claim, but if your subcontractor is overseas and uninsured, your insurer can’t sue them to get the money back (subrogation), which destroys your loss history.
- The “Uninsured Subcontractor” Penalty: Some policies have a specific clause that reduces your coverage limit if you fail to verify your subcontractor’s insurance.
- W-9 vs. W-2: It doesn’t matter if they are a freelancer or an employee; to the client, they are your responsibility.
The “Why”: The Independent Contractor Clause
The Trap: Many “Solo” Professional Liability policies cover You (the Named Insured). They do not automatically cover work done by independent contractors unless specifically endorsed.
Check your policy for the definition of “Insured.” Does it include “Independent Contractors acting on your behalf”?
If not, you have a “Vicarious Liability” gap. You need a policy that explicitly covers “work performed by subcontractors.”
The Investigation: I Quoted 3 Major Carriers
I called agents and asked: “If my freelancer hacks my client, am I covered?”
1. The Hartford
- My Analysis: Their “FailSafe” technology policy is excellent here. It includes broad “Vicarious Liability” coverage. They essentially treat the sub’s error as your error.
- The Cons: They strongly prefer you collect Certificates of Insurance (COI) from subs. If you don’t, your premium might be higher at audit.
2. Hiscox
- My Analysis: Hiscox is freelance-friendly. They generally cover the work of subs under your policy limits. However, they are strict about “Criminal Acts.” If the sub intentionally left the backdoor (malice), Hiscox might defend you but deny the damages caused by the crime.
3. Next Insurance
- My Analysis: Good for simple setups. But in 2026, their automated underwriting often asks, “Do you subcontract more than 25% of work?” If you answer “Yes,” they might decline to quote or strip the coverage.
[IMAGE: Screenshot of a policy definition showing “Who Is An Insured” including contractors]
Comparison Table: Subcontractor Liability
| Carrier | Covers Sub’s Errors? | Intentional Backdoor? | Requires Sub COI? | Best For… |
| Hartford | Yes | Defense Only | Preferred | Agencies |
| Hiscox | Yes | Defense Only | No | Solos hiring help |
| Next | Limited | No | Yes | Small Teams |
Step-by-Step Action Plan
- Check Your Policy: Search for “Vicarious Liability” or “Independent Contractors.”
- Update Contracts: Add an “Indemnification” clause to your Upwork/Freelancer contracts (even if it’s hard to enforce).
- Code Review: You have a “Duty to Inspect.” If you didn’t review the code, that is your negligence.
- Notify Carrier: Report the breach immediately. Do not mention “Malice” yet; focus on “Security Vulnerability.”
FAQ
Can I sue the Upwork freelancer?
Yes, but good luck collecting. They likely have no assets. This is why you carry insurance.
Does Upwork’s insurance cover this?
Upwork offers some “Talent Protection,” but it is usually for the client, not for the middleman. Don’t rely on it.
What if the sub was in a sanctioned country?
Then you have bigger problems (OFAC violations). Insurance will not pay claims involving sanctioned entities (e.g., North Korea, Iran).