An underinsured, or worse yet, an uninsured subcontractor, could increase the premiums of your workers compensation insurance for years to come. If the subcontractor you hire fails to have adequate coverage, your policy may be used instead to pay the claim for your subcontractor. Using a subcontractor has many advantages, such as bringing expertise in certain areas to your business, but those advantages can be quickly diminished if the subcontractor isn’t adequately insured.
Many knowledgeable business owners use the services from uninsured subcontractors unaware of the many risks they are taking on for their own business. An uninsured subcontractor is a business that, among other things, doesn’t provide workers compensation insurance for its employees. Often times it is because the subcontractor is a one-man business, but time to time, it is due to ignorance of the law and an effort to avoid paying the fee for workers compensation insurance. If you hire subs you need to know about uninsured subcontractors workers compensation.
Workers’ compensation insurance provides coverage for employee’s disability and medical costs due to work-related injuries and illnesses. Many states mandate this type of insurance, but some states have additional requirements as well, so be sure that you are familiar with the laws of the state(s) in which you do business. There are insurance agents willing to help you understand the uninsured subcontractors workers compensation requirements in your state.
Regardless of state laws, it’s a good idea to require that any subcontractors you do business with carry their own workers comp insurance. If they aren’t covered, an on the job injury could force you to be held financially responsible. For example, if an employee of a subcontractor sustains a back injury while working on your client’s site, and the subcontractor isn’t insured, that employee could still seek damages for being injured on the job.
When that employee doesn’t get compensated from his own employer, the next place to turn would be your business. Unless you are paying premiums to cover your subcontractors and their employees, you could be paying for the subcontractor’s employee’s medical bills out of your own pocket, or worse yet, facing a lawsuit.
The truth about uninsured subcontractors is that there is no such thing. When an uninsured subcontractor, or his employee, is injured while performing a job on your behalf, the courts consistently have upheld that it is you that’s held responsible for that employee. The court will not let you opt out of that duty.
Putting up signs or signing documents of any kind cannot relieve you of this responsibility. Ultimately, you will be forced to carry these employees on your worker’s compensation policy whether or not you want to, and whether or not you realize it. It is because of this involuntary uninsured subcontractors workers compensation coverage that your insurance may raise your premiums if they find out you are hiring subcontractors that don’t have their own worker’s compensation insurance. Even one or two uninsured subcontractors has the potential to more than double your insurance premium.
An even greater risk to using uninsured subcontractors is that they might not take the types of precautions that you take when running your business. You know that safety pays. You make efforts to be sure that you and your employees are not working with broken tools and equipment. You try to protect them from toxic substances. Unfortunately, your uninsured subcontractor might not take those same precautions. An injury or claim by your subcontractor or his employee, even if it’s due to their own negligence, could force you to suffer financial loss, whether it be in the form of an increase in insurance premium or lawsuit. These are just a few examples of uninsured subcontractors workers compensation issues.
Most importantly, avoid using any uninsured subcontractors when you can. When hiring a subcontractor to complete a job for you, especially in high risk occupations such as roofing, ask for proof of current worker’s compensation insurance coverage. Don’t accept photocopies of these documents, instead ask to receive them directly from the subcontractor’s insurance agent.
We hope this article on uninsured subcontractors workers compensation has been informative. If you use numerous subcontractors, be sure you have some way to keep track of when their insurance policies expire. Consider using one of the many software programs that will automatically track the expiration dates and alert you when one is getting ready to expire.
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