DJs: Do you subcontract? Work as a subcontractor? Here’s what you need to know.
As you’ve probably noticed, the disc jockey industry is staffed by plenty of subcontracting arrangements. However, if a gig results in a lawsuit, your exposure and risk can greatly vary depending on your subcontracting status. There are two important rules to keep in mind.
Rule 1: From an insurance point of view, you are considered an “employee” if you work exclusively for one company – even if that company considers you a subcontractor or an independent contractor. Insurance coverage only protects the insured company and its employees. It will not provide defense or judgment coverage to a subcontractor or independent contractor.
Rule 2: Accurate set-up reporting is essential. If a claim occurs and it is discovered that there are more set-ups than reported on the policy, the coverage will be applied to the set-up with no loss, and you’ll have no protection.
Below are two examples of these rules in action:
Rule 1 example – Subcontractor loses shirt
Rock On Productions had a gig scheduled for Thursday night. When owner John Carver received a request to emcee another event at the same time, he hired subcontractor Chris Evans to work on his behalf, covering the party under the Rock On Productions brand.
While Chris was working the event, he went out onto the floor to dance with a guest. Unfortunately, he spun her too hard and she fell, breaking her hip. She subsequently sued Rock On Productions and Chris Evans for damages of $350,000. Ultimately, the court determined that it was a contributory loss – Rock On Productions was responsible for $125,000 because the company had hired Chris Evans to work on its behalf. Chris Evans was held liable for $225,000 of the loss.
Because Chris was not an employee, Rock On Production’s policy did not provide insurance coverage for Chris. Furthermore, Rock On Productions had purchased liability insurance for only one set-up, so even if Chris had exclusively worked for Rock On Productions as an employee, the coverage wouldn’t apply due to inaccurate set-up reporting. As a subcontractor, Chris had assumed he would be protected by Rock On Productions’ policy. Because he had no liability insurance, Chris became personally responsible for his portion of the loss. Needless to say, it was financially devastating.
Rule 2 example – Help has unintended consequences
Katie Frank’s DJ business was booming. To help meet demand, Katie subcontracted Nancy Bartles to work for her company exclusively. Katie thought it was the ideal situation – she could grow without hiring and paying payroll taxes.
One night, Katie and Nancy both had gigs. They knew Nancy’s event was going to be lively – she had been asked to demonstrate the tango with the bride’s brother-in-law. All was going according to plan until her dance partner threw out his back. He slipped a couple of discs and was out of work for several weeks.
Although Nancy had worked the event, Katie was sued for $100,000 because Nancy was working on behalf of Katie’s business. In the eyes of the insurer, the exclusive subcontracting arrangement made Nancy an employee. During the claim investigation, it was discovered that Katie Frank’s DJ business was running two DJ set-ups when she had only purchased coverage for one. Since insurance had not been purchased on the second set-up, the policy would not respond to the lawsuit. In the end, it was determined there was no coverage and Katie Frank’s DJ business had to pay the $100,000 out of pocket.
How can you avoid these costly situations?
- If you work as a subcontractor or independent contractor, secure your own liability insurance. In the scenario above, Chris could have avoided a $225,000 bill if he had his own liability policy.
- If you hire subcontractors or independent contractors, obtain a Certificate of Insurance from the subcontractor or independent contractor, as proof of coverage. A liability limit of $1,000,000 or more is recommended.
- Regardless of whether you have subcontractors, independent contractors or employees, make sure you purchase the correct number of set-ups. If you don’t, your insurance may not protect you as intended.
Need coverage for your business?
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Note: This case study is based on real claims scenarios. However, the story has been fictionalized to protect the privacy of those involved.