It happens every day…a contractor hires another contractor, the sub, to help with a job…then finds out later the subcontractor did not have a workers compensation policy in place and could not provide a certificate of insurance.
This situation can be far more reaching but from a workers compensation stand point…at a minimum…it will cost the hiring contractor additional premium they may not have anticipated paying. You see, in general, if that subcontractor has no workers comp policy in place then the hiring contractor’s workers compensation policy would treat that uninsured sub as a “statutory employee” and provide coverage for an injury…just like he was a normal employee. And when an insurance company has the obligation to pay a claim, they are due a premium.
So what can you do? ….really not much after the fact…but here’s some pointers:
- Use only insured subcontractors!
- Require that subcontractors provide a valid certificate of insurance before any job begins.
- Before paying the subcontractor…validate coverage, make sure the policy is still in place and that there were no lapses in coverage by asking for another certificate. Yes…some folks let their insurance policies cancel for non-pay and other reasons.
- Require that subcontractors carry workers compensation insurance in your job contracts.
- Develop a method that allows you to be reimbursed by an uninsured subcontractor for the additional costs you incurr due to their lack of valid coverage.
So remember…after the fact you can’t do much to protect yourself from an uninsured subcontractor and workers compensation issues. You must be proactive!