For many reasons, being an IC delivery driver is a great opportunity. There is nothing like being self-employed, but that opportunity does not come without some risk. From our experience, we have found many ICs do not carefully consider the inherent exposure created by their occupation, nor do they adequately address these exposures and protect themselves with something as simple and as cost-effective as an insurance policy(s).
Here is what any prospective IC driver needs to consider as risks:
Contracting Carrier Insurance
You employ the services of an IC (or several ICs) to perform deliveries for you and while there are many advantages to this business model, it is critical to remember that outsourcing the delivery work does not outsource all the risk to your company. So what insurance should you require from an IC? In short, everything you read in part I of this blog should be obtained (and monitored) from any IC you engage.
The requirements should be clearly laid out in your IC agreement for both parties to review, agree upon, and execute. But the enforcement of the requirements is equally as important as the articulation of them. If you fail to collect proof of required coverage and monitor it for updates (such as when policies renew throughout the year) you are providing yourself little protection in a claim. Often, your corporate insurance policies require you to be doing this and failure to do so can negate coverage. It makes little sense not to have a system in place to perform this task.
Speaking of protection, what types of insurance should a company utilizing ICs have? In actuality, your insurance program may not differ too greatly from the ICs coverage, but there are some important items to have included.
Non-owned & hired auto liability insurance
If you rely solely on IC drivers using their own equipment, then a Hired/Non-Owned Auto Liability policy for $1,000,000 is needed. It will provide protection to you, as the courier company, should you be named in a claim or legal proceeding as a result of an auto claim involving your IC driver. It provides no coverage to an IC driver, but does provide your company with legal defense and indemnification in the claim, should you need it. If you also have a fleet of vehicles, this can sometimes be included on the insurance policy you have for your fleet.
Much like the IC, you have a responsibility to keep customers’ goods safe and the use of a good Motor Truck Cargo insurance policy is often needed. Your use of ICs also necessitates the need for courier/dishonesty bonding which will protect against first-party theft and allow you to say your drivers are “bonded." Policy limits (in both cases) should be the same and should be high enough to cover the value of replacing customers’ goods. It should be noted that if you require cargo insurance from your ICs, you could increase your own cargo deductible to match the policy limit they are providing, without duplicating or sacrificing coverage, and potentially saving premium dollars. Your attorney and insurance broker should be consulted before making this change.
General Liability Insurance
Once again, you need the same standard limits ($1,000,000 per occurrence and $2,000,000 general aggregate) as the ICs. But it's possible your landlord or customers may ask for increased limits, which are available. This coverage will provide protection to you, as the courier company, should you be named in a claim or legal proceeding because of a non-auto or non-cargo related claim. It provides no coverage to an IC but does provide your company with legal defense and indemnification in the claim, should you need it.
More than likely you have employees and therefore, need to have Workers' Compensation (WC) coverage in place as dictated by state statutes. However, procuring WC coverage for your W-2 employees can be a tricky proposition without proof of WC from each of your ICs. There are avenues to consider involving WC for your ICs that you manage or a combination of WC and Occ-Acc policies. This insurance coverage is complex and could be an article in and of itself, so we would simply stress that you need to speak to an insurance professional who understands both your industry and the WC world to make sure you have exactly what you need without mistakenly putting yourself in position for a poor surprise.
As we’ve outlined above, there are important coverage issues that need to be addressed when either operating as an Independent Contractor or running a business and choosing to utilize them as part of your operation. The world of fast-paced consumerism has only heightened this issue and continues to further open the door to more business as well as potential liabilities. It’s imperative that you proceed with caution when handling these issues and consult your insurance professional to insure you are properly addressing the risks associated with these opportunities.