What Kind of Insurance Do Independent Contractors Need?

As an independent contractor, you might need insurance for protection against the repercussion you can encounter while performing your duties. In most cases, an independent contractor is held liable for the wrongful or negligent act done by him or his workers, or for any workplace injury. Typically, an independent contractor without staff is not required by the statute, to buy workers’ compensation insurance. However, the workers’ compensation insurance need cannot be stressed enough.

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Compensation for the Employees

The independent contractor is held responsible for any wrongful act that his worker may commit during the course of employment, or if the workers suffer from any workplace injury or illness. In the Govind Prasad Sharma v. Board Of Revenue And Ors. on 29 September 1964, a writ petition under Article 226 was filed in the Court of Madhya Pradesh. In this case, the court held that the independent contractor is liable for all the improper acts committed by his employees.

Hence, if any employee suffers from injury or damage, the independent contractor is liable to get the appropriate treatment for his employee. So, the contractor must buy worker compensation insurance for all the workers.

Workers Compensation Insurance Need for Independent Contractor

Every independent contractor may not necessarily have workers under him. For example, a carpenter or a heavy-vehicle driver can undertake tasks as an independent contractor. Hence, in such circumstances, the independent contractor might suffer from losses or injury while performing his duties.

In Shri Krishan v. Jasoda Devi on 27 September 2017, an independent contractor suffered an injury and asked the appellant to pay the allowances to compensate for the damage. However, the learned counsel for the appellant argued against the request of the respondent. He stated that the appellant is not liable to pay any compensation for the injury suffered by the contractor as the contractor is an independent contractor and does not fall under the Employee's Compensation Act. However, in this case, the court re-examines section 12, which binds the employer to pay compensation to the employees.

The court held that as per section 12, for every person who executes a specific task for the purpose of trade or business for another person, the latter is liable to pay compensation if the former gets injured while discharging his duty. In Koli Mansukh Rana v. Patel Natha Ramji, the court explained that the primary purpose of section 12 is to ensure the appropriate indemnification of workers under the Workers’ Compensation Act. However, most of the policies offered by insurance companies do not cover independent contractors under their worker compensation insurance.

Role of Worker Compensation Insurance

The need for worker compensation insurance is crucial in most industries. In Govind Prasad Sharma v. Board Of Revenue on 29 September 1964, it was made obligatory for the employer to compensate the employee if the latter suffers any workplace injury. The workmen’s compensation insurance ensures that the frontline workers must be adequately compensated for the injuries they sustain on duty.

Conclusion

Workmen’s compensation insurance is considered one of the most common and effective risk mitigation tools. It is a type of mandatory requirement for certain industries. As an independent contractor, in order to protect himself and his workers from potential losses arising from accidents, there is a higher need for workmen’s compensation insurance.

Written By: PolicyBazaar - Updated: 26 December 2022