Insurance and Liability When Hiring Filipino Remote Workers

You’re thinking about hiring someone in the Philippines.

Maybe you already have.

And at some point, this question hits you: “Wait… what if something goes wrong?”

What if they accidentally delete a client’s data? What if they send the wrong invoice? What if they handle sensitive information and there’s a breach?

Who’s responsible? Here’s what’s actually happening.

The Classification Problem Nobody Wants to Talk About

Before we even get to insurance, we need to address the elephant in the room.

Are you hiring a contractor or an employee?

I know what your contract says. That’s not what I’m asking.

I’m asking what the actual relationship looks like.

Because Philippine courts don’t care what you wrote in a document. They look at how you actually treat people.

The Philippines uses what’s called the “four-fold test” under the Labor Code to determine employment. 

Courts look at four elements: 

• Selection and engagement, 

• Payment of wages,

• Power of dismissal,

• Power to control the employee’s conduct.

That last one is critical. It’s often called the “control test.”

The more control you exert over methods, schedule, and tools, the more it looks like employment under Article 295 (formerly Article 280) of the Philippine Labor Code.

Technically If someone is your employee under Philippine law, you can be held liable for damages they cause while doing their job. 

That’s vicarious liability under Article 2180 of the Civil Code of the Philippines. You’re responsible for what your employees do within their scope of work.

If you’re treating someone like an employee, Philippine courts might decide you are their employer.

Even if you’re a US company. Even if you never set up a Philippine entity.

And that changes everything about your liability exposure.

What Your Current Insurance Probably Doesn’t Cover

Let’s break this down by who should carry what.

For you (the US/UK/AU Employer):

Professional liability / E&O – if you’re delivering any kind of professional service where mistakes could cost clients money.

Call your broker and ask two specific questions:

1. Does this policy cover work performed by independent contractors?
2. Does coverage extend to services delivered from the Philippines?

If the answer to either is no, you need to either add that coverage or require your contractors to carry their own.

Some policies will let you add contractors as additional insureds. 

Others won’t. Some will cover contractor work automatically if you’re directing and controlling it (which, remember, makes them look more like employees).

Cyber liability insurance – if your remote workers access customer data, payment systems, or sensitive business information.

This is non-negotiable if you’re handling any kind of personal data at scale.

Your policy will ask about security practices. Be honest.

 If you’re giving contractors full admin access with weak controls, either fix that or expect the policy to be expensive (or have exclusions).

General liability – less critical for purely remote work, but check the territorial scope anyway.

For Filipino contractors:

In an ideal world, contractors carrying professional liability insurance for their work would be standard.

In reality, it’s rare.

Professional indemnity insurance is available in the Philippines. 

Providers like Raroco Insurance, AIG Philippines, and Howden Group offer coverage for Filipino freelancers and businesses.

But most individual remote workers don’t carry it. 

Cost is one reason. Lack of awareness is another. And most foreign clients don’t require it.

Some clients do go further and require a certificate of insurance before the contractor can start work..

Common Insurance and Liability Issues With Remote Workers

Let me walk you through the real scenarios.

Not hypothetical disasters. Things that actually happen.

1. Data breaches and privacy violations

Your remote worker logs into your CRM from a coffee shop. Their laptop gets stolen. Or they click a phishing link. Or they accidentally send customer data to the wrong email address.

Now you have a data breach.

If you’re in the US, you might need to notify affected customers and state regulators. If you’re handling EU data, GDPR penalties can be massive. 

If the affected customers are in the Philippines, their data privacy law kicks in.

Your cyber insurance might cover this. 

But only if you can show you had reasonable security controls in place.

 If your remote worker was using their personal device with no encryption, no two-factor authentication, no access controls… the insurer might argue you were negligent.

2. Professional mistakes that cost clients money

Your remote worker is handling bookkeeping. They make an error in a client’s financial records. The client makes business decisions based on wrong numbers. They lose money.

They sue.

If your remote worker is covered under your professional liability policy, great. If they’re not, you’re paying that settlement out of pocket.

3. Misclassification and back-pay claims

You’ve been calling someone a contractor for two years. You set their schedule, require them to use your tools, supervise them closely, and they work exclusively for you.

They file a claim with Philippine labor authorities saying they’re actually your employee and you owe them two years of benefits.

13th month pay. SSS contributions. PhilHealth. Pag-IBIG. Overtime. Holiday pay. 

Potentially separation pay if you try to end the relationship.

This isn’t covered by insurance. This is a direct legal liability.

And it happens more than you think. 

4. IP theft or misuse

Your remote worker has access to your proprietary systems, client lists, or trade secrets. 

They leave to work for a competitor. Or they start their own competing business using your client relationships.

Your contract has confidentiality and non-compete clauses. But enforcing those across international borders is expensive and uncertain.

5. The worker gets injured while working for you

This is the one people don’t think about.

Under Philippine occupational safety and health rules, even remote workers are supposed to have safe working conditions. 

If someone gets injured while working from home and they’re classified as your employee, you might have liability.

Most US or UK workers’ comp policies don’t cover foreign workers. At all.

If you’re using an EOR or agency, they should be handling this. 

If you’re hiring direct as a contractor, it’s theoretically the contractor’s responsibility.

What Most Companies Get Wrong About Insurance and Liability

Here’s what nobody wants to say out loud.

Most small companies hiring their first few Filipino remote workers don’t have perfect insurance coverage for this scenario.

They’re rolling the dice.

Sometimes it works out fine. Most of the time like 99% of the time, actually.

But “most of the time” isn’t a risk management strategy.

You can do this better.