IT Staffing Agency Insurance

Vicarious liability means that your agency could be held responsible for the conduct of the workers you recruit. For example, a contractor placed by your staffing agency might:

• Misconfigure a firewall, leading to a data breach that exposes customer records
• Make discriminatory remarks about other employees at a client's business
• Write faulty code that causes a system crash and downtime for the client

A key policy that would pay for these types of claims is technology errors and omissions insurance (tech E&O), which bundles third-party cyber insurance and errors and omissions insurance at a lower price than buying these policies separately.

Tech E&O covers legal defense costs if a client files a lawsuit related to professional negligence, whether your agency or a temp worker was responsible. That includes data breach lawsuits, which are a major concern for any business that stores customer data.

You'll also need standard cyber insurance, also called data breach insurance, to cover costly cyberattacks and data breaches at your own company. Because you handle so much personal information belonging to applicants, a data breach could be devastating.

Cyber insurance helps pay for compliance with state data breach laws, such as customer notifications and fraud monitoring services. It pays for data breach investigations, ransomware attacks, and often includes assistance for preventing a data breach in the first place.

Finally, employment practices liability insurance (EPLI) safeguards your agency if you're sued over wrongful termination or another violation of employee rights. EPLI can often be added as an endorsement to general liability insurance or a business owner's policy.

Yes, you'll need business insurance to sign contracts and comply with state laws. IT staffing agencies are usually required to carry the following:

• Tech E&O is often required by clients, and protects against claims that you or a temp worker committed a negligent act.
• Workers' compensation insurance is required in most states for businesses that have employees.
• Commercial auto insurance is required in almost every state for vehicles owned by a business. If you drive a personal, rented, or leased vehicle for work purposes, then you can buy hired and non-owned auto (HNOA) insurance instead.
• General liability insurance helps you sign commercial leases and get business loans. It protects against accidental bodily injuries and property damage, along with advertising injuries.

There are a couple key differences in coverage for W-2 vs. 1099 contractors:

• W-2 contractors are considered employees. The staffing agency is their legal employer, which comes with responsibilities. Most important, your state may require you to provide workers' comp and other benefits for employees. Employees are covered under the agency's liability insurance, including general liability and tech E&O.
• 1099 contractors are self-employed. 1099 independent contractors are responsible for their own costs, including any injuries or lawsuits. Many agencies ask them to show proof of insurance before they're placed at a client's business.

Because of vicarious liability, it's important to carry insurance regardless of how workers are classified. If a contractor makes a mistake that harms a client, your agency could be held responsible, especially if something was overlooked during the hiring process.

In short, both types of contractors are liabilities to a staffing agency, which is why you need appropriate coverage.

Your staffing agency could end up facing a lawsuit if a contractor you placed causes a data breach. For example, a contractor might use an older version of software with known vulnerabilities, or accidentally set up a cloud system with public access to private information.

The client would have to pay for the direct costs of the breach, such as notifying customers and providing fraud monitoring services. These costs can escalate tremendously in cases where a breach exposes personal information belonging to thousands of customers.

To recoup their costs, the client might sue your agency and claim you failed to meet a standard of care when you hired the contractor. That's why you need tech E&O in addition to cyber insurance that covers the risk of a breach at your own company.

Here’s a closer look at additional key insurance products and why you should carry them:

• Commercial property insurance covers your business property and equipment if it's damaged, destroyed, or stolen. It provides crucial protection in the event of a fire, storm, or burglary.
• Business income insurance, also known as business interruption coverage, offsets your lost income when your business is forced to close because of a fire or other covered peril. It helps pay for normal operating expenses until you can resume business operations.
• Business owner's policy (BOP) is a cost-effective way for small staffing agencies to buy commercial property insurance and general liability insurance together. It covers common third-party lawsuits and business property damage.
• Fidelity bonds, also called employee dishonesty coverage, provide financial reimbursement in the event of employee theft or fraud. Clients may require you to be bonded and insured before they'll work with your agency.

To get affordable insurance today, fill out Insureon’s easy online application. You can keep costs low by implementing cybersecurity controls and other loss control measures that reduce your risks.

Remember, the cheapest policy isn't necessarily the best choice. Our licensed agents will help make sure you get the right coverage for your IT staffing agency's unique needs.