Insurance for freelancers at construction sites
A well-known phenomenon at construction sites is the presence of large numbers of freelancers, such as project managers, construction engineers, foremen and recently also safety assistants.
In many cases these people are freelance professionals who issue an invoice for their so-called independent services rather than receive a wage slip, even though they are an integral part of the professional staff team. On many occasions their work in the project is their only job.
When coming to address the question of employment relations, in many cases freelancers of this type who work eight hours a day for the same employer and who have an office or desk at the site can legally be considered as employees to all intents and purposes from a substantive perspective.
It is important to note that most Contractors All Risks insurance policies do not cover such freelancers and this is true whether we are dealing with a foreman who may be held liable for a major safety related event (including a fatal work accident) or a project manager who can be held liable for property damage.
We are therefore dealing with a major issue from the perspective of the building contractor or the property developer, as well as for the freelancer himself or herself. It is common knowledge that these freelancers do not usually arrange their own Professional Indemnity insurance to protect themselves in the event of a claim, and their exposure is high, both of being held liable to pay compensation for bodily injury or property damage, but also and no less importantly, the costs and resources involved in conducting legal proceedings even if the claim against them is ultimately dismissed.
In the absence of formal employment relations between the building contractor or the property developer and the freelancer who provides the service, an insurable exposure arises which needs to be considered.
The insurable solution
In most cases, an appropriate solution is to rely on the Contractors All Risks policy, by including specific extensions to cover the activity of freelancers. This solution enables the appropriate risks to be covered and enables the specific person to work as a freelancer rather than as a salaried employee for various considerations such as flexibility, taxation and the like.
Such an extension to the Contractors All Risks policy can also include the personal liability of the freelancer in the event of a claim.
It is also possible to ask the freelancer to arrange their own independent Professional Indemnity insurance, however this is not always a practical solution. Firstly, it should be borne in mind that Professional Indemnity insurance is quite costly, and the cover needs to be renewed for several years after completion of the project due to the claims-made nature of the policy.
Stipulating that freelancers are required to arrange Professional Indemnity could create a high acceptance threshold, which the person cannot (or does not want to) comply with. Furthermore, in some cases it could be difficult to arrange Professional Indemnity insurance, specifically in the case of foremen and safety officers who are not qualified engineers or architects, and in some cases it is simply impossible, and even where it might be possible – the limits offered are usually very low in relation to the potential risk.
Including an extension in the Contractors All Risks policy to cover the liability of freelancers has several advantages:
1. Protecting the freelancer also protects their employer – The employer (or “client”) of the freelancer has an interest in protecting the latter, since in many cases freelancers themselves include indemnity clauses in their contracts which require their client or employer to indemnify them in the event of a claim.
2. Preventing mutual legal action – Legal disputes with freelancers working at the site, such as project managers, foremen and the like, do not contribute anything useful to anyone, quite the opposite – they can be quite harmful…
3. Inability to obtain Professional Indemnity insurance for freelancers – It could be difficult or impossible for such freelancers to arrange Professional Indemnity insurance, and in many cases the only viable solution is to include them under the Contractors All Risks policy.
4. Protection against claims for indemnity – Arranging a Contractors All Risks policy with a specialist insurance agent who has the expertise to tailor the cover to the specific needs of the parties, will substantially reduce the possibility of a direct claim being made against the freelancer, or a subrogation claim by an insurance company sometime in the future.
5. Financial advantage – Avoiding the need to arrange multiple insurance policies. If a freelancer needs to arrange their own insurance, they will undoubtedly seek to recuperate the cost in the fees they charge the contractor / developer, and by covering them under the Contractors All Risks policy, this cost is saved.
6. Avoiding the need for long term run-off cover on claims-made policies – Covering the freelancer under the Contractors All Risks policy means that there is no need to monitor renewal of a Professional Indemnity policy for several years ahead, and any future claim will be dealt with based on the occurrence date of the event.