My previous post below generated some questions specifically from web designers. Let me address some of them!
Do I Need Professional Liability if I Just Freelance Occassionally?
Well, this is a loaded question. Of course the answer is that if you do ANY web design work whether you’re a free lancer (independent contractor), a very small company, or a company with many employees….YES you need Professional Liability. The need for the coverages isn’t dependent on the amount of design work you do, it’s based on the fact that you do it for pay, period. It only takes one claim to financially ruin a company or an individual. Remember, if you do design work as an independent contractor (individual proprietor), your personal finances and assets are at risk in the event of a claim.
Do I Need General Liability or a Small Business Liability Package Too?
If you work from home, and you NEVER meet personally with clients (either at their place of business or your home office), you may be fine going without general liability. Most general liability policies for consultants or web design professionals exclude products and completed operations that would be covered on the Professional Liability policy so it is pared down to the potential claims relating to bodily injury and property damage while performing a job. This can be a bodily injury accident caused by a trip over a laptop cord while giving a presentation at your client’s premises, as well as a trip on the front porch as they enter your premises, so if there are person to person client interactions it is advised that General Liability insurance be carried. It is inexpensive in comparison to the Professional Liability because of course carriers know that the risk of a claim in the bodily injury/property damage category is very low. Your risk lies almost entirely on the professional liability coverage side. As a side note, the small business liability packages combine property coverage (such as your office equipment) with General Liability along with potential other coverages such as Hired/non-owned auto coverage if you have employees that use their vehicles to travel to client’s premises on business etc. Ask for a package if you have employees and/or a substantial amount of business equipment to cover.
Do I Need Workers Compensation?
For Web Designers, as well as related businesses, this raises a whole new issue of whether your employee is a true direct employee or whether they are an independent contractor. Even if you pay your web designers as independent contractors (as 1099′d employees), your designers could still be considered employees under state law depending on whether they meet certain criteria, and California State law requires you carry Workers Compensation Insurance if you have employees. Workers Comp coverage for web designers is fairly low, and as with all workers comp, is tied directly to your annual payroll costs. Workers compensation and employers liability insurance in California are combined together so you wouldn’t need to apply for separate policies as employers do in other states.
Of course, as an insurance broker, I do not provide legal advice, only a lawyer can provide you the actual legal advice that you may be seeking, however, the following check list applies to any Independent Contractor vs Employee situation and can be found at the Calif Dept of Industrial Relations website http://www.dir.ca.gov/dlse/FAQ_IndependentContractor.html
- Whether the person performing services is engaged in an occupation or business distinct from that of the principal; (do they work for other employers, or just you?)
- Whether or not the work is a part of the regular business of the principal or alleged employer;
- Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
- The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
- Whether the service rendered requires a special skill;
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
- The length of time for which the services are to be performed; (ongoing versus occasional work)
- The degree of permanence of the working relationship;
- The method of payment, whether by time or by the job; and
- Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
I hope that the above questions asked by others, may also be helpful in answering your questions as well. Should you have further questions, or wish to request a quote on any of the above coverages, contact me directly at 877-257-1652 or firstname.lastname@example.org and I’ll work with you to get the coverages you need.