Do I need Liability insurance for my business?

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Do I need Liability insurance for my business?

My business is a staffing company, set up as a single member LLC. I send out
bartenders, wait staff, BBQ grillers, etc to private and corporate events all
over NJ, parts of NY and PA. Many events are in private residences. The people
that I send are not employed by me, as they are not on my payroll. They get paid
by the client, as do I. If they cause property damage or bodily injury at a
client site, am I liable since I am not their employer? Do I need any contracts
between me and the client, or between me and the people I send them?

Asked on May 4, 2018 under Business Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Yes, you could be liable for property damage or bodily injury if either of the following is the case:
1) If the relationship between you and the people you send out (e.g. your degree of control over them; their dependence on you and your company, as opposed to having multiple independent sources of business) is sufficient that regardless of what you and they say or how you characterize the relationship, or even who writes the paycheck, they are considered to be employees. While we are not saying this will happen, there are circumstances under which it could: the law looks to the facts of the relationship, not what you want to call or how you describe it, and if workers have all or most of the hallmarks or indicia of being your employees, not independent contractors, they may be considered your employees.
2) If you were negligent or careless in screening the people, or sent over someone whom you know has a criminal record or history of violence, etc., you could potentially be liable on the basis of having been unreasonably careless in sending unsuitable workers or contractors over--in this case, you would be liable for your failure to exercise reasonable care in deciding who to send out.
It is impossible to set this up so you cannot be sued under any circumstances--therefore, you should have liability insurance. 
You should have contracts to protect yourself, too. Contracts with the workers can state and reinforce that they are independent contractors, which will not 100% guaranty that they will be treated that way (remember, the law looks to the facts, not what you say), but will help estabish their independence; the contracts can also make clear that you are not liable if they are injured on the job or not paid, and require them to sue the person  or business for whom they were working; and the contract can also state that if you are sued due to anything they did, they will repay or reimburse any costs you incur. Similarly, contracts with clients can reinforce that the workers are independent contractors and require the clients to sue the workers, not you, for injuries or losses. (Though the contract only binds the persons who sign it, so anyone else at the location or event  would not be bound by this contract.)


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