Subcontractor Insurance and other general how to's

Hi, I need some help understanding the various laws and terms
regarding a placement agency.

My firm ABC will be going into business with a company let's call them
LMO to provide them with a resource/subcontractor that they could
place at one of their clients let's call the client XYZ.

My firm ABC will be hiring someone on a 1099 basis as a sub-
contractor. That person does not have a company of their own and
neither do they have any insurance.

My company ABC is already incorporated. I have liability insurance for
my company and I am covered under it.

I am trying to find out what kind of insurance would I need now that I
am hiring someone on a 1099 basis as a sub contractor. The reason is
that the sub contractors do not have a company. They are individuals.
Since they do not have a company they do not have any business
insurance either.

They are saying that they do not need to form a company and they can
use his/her personal name and I can pay them a 1099 on their name
directly.

The insurance company is not ready to put that sub-contractor on the
insurance. Can someone please advise how to go about this.

Is the only way out of this to have the sub-contractor open up a
company and get insurance for their company or can they get business
insurance on their personal name as well.

Please help. Thanks

On Fri, 15 Feb 2008 20:45:06 -0800 (PST), wrote in
:

>Hi, I need some help understanding the various laws and terms
>regarding a placement agency.

What state are you in (assuming that you're in the U.S.)?

>My firm ABC will be going into business with a company let's call them
>LMO to provide them with a resource/subcontractor that they could
>place at one of their clients let's call the client XYZ.

Is this a partnership or subcontract arrangement?

>My firm ABC will be hiring someone on a 1099 basis as a sub-
>contractor. That person does not have a company of their own and
>neither do they have any insurance.

E&O, general liability, or both?

>My company ABC is already incorporated. I have liability insurance for
>my company and I am covered under it.
>
>I am trying to find out what kind of insurance would I need now that I
>am hiring someone on a 1099 basis as a sub contractor.

The best person to ask is your insurance broker or agent.

>The reason is that the sub contractors do not have a company. They
>are individuals. Since they do not have a company they do not have
>any business insurance either.

Note that sole proprietors can have business insurance. Your sub in
this case doesn't, but that doesn't mean that he can't get it.

>They are saying that they do not need to form a company and they can
>use his/her personal name and I can pay them a 1099 on their name
>directly.

That is true.

>The insurance company is not ready to put that sub-contractor on the
>insurance. Can someone please advise how to go about this.

So the real issue here is that either your client or partner/prime
contractor is requiring that you have E&O, general liability or both.
You have it, but your sub does not and your carrier doesn't want to
cover your sub. The only solution is for your sub to get a policy.

>Is the only way out of this to have the sub-contractor open up a
>company and get insurance for their company or can they get business
>insurance on their personal name as well.

They don't have to incorporate to get insurance, though some carriers
may not cover sole proprietors. Check with your agent or broker to
see if they can help. If they can't and you're in the Mid Atlantic
area, I can put you in touch with my broker.

You may also need to pay your sub a little more to help cover the cost
of the policy. General liability is usually quite cheap, on the order
of a couple of hundred dollars a year. E&O, on the other hand, is
quite expensive - I'm paying around $3,000 per year. Even so, if the
contract is worth $100,000 or more to you, adjusting the numbers a bit
to help cover the insurance may still be worth it.
--
Charles Calvert
Moderator - alt.computer.consultants.moderated
Submission Address: accm DeleteThis @celticwolf.net
Contact Address: accm_mod DeleteThis @celticwolf.net