Subcontractors Certificates Of Insurance
I have posted on this subject very often. Subcontractors and Workers Compensation insurance are the most visited parts of this blog. Feel free to use the search box on the right and search for subcontractors to see all of the articles. This is an article that I wrote 12 years ago. It is still relevant today.
One of the facets of doing business in today’s economy is subcontracting out part of your work product.We have seen so many employers having to pay a claim for a worker they never knew even existed and was never on their payroll.
Most State WC Boards will climb the ladder of insurance. If a subcontractor does not have proper WC coverage, the State WC Boards will look to the contractors up the ladder to provide WC coverage for an injured employee. Most states have a sub-section of the WC laws that apply just to subcontractors.
If a subcontractor your company is using has subcontracted out some of their work, you may easily have three of four layers of employees that you never knew existed on your WC policy.
Your WC carrier can technically deny coverage on a claim where the subcontractor did not cover their employee. We have seen a main/primary contractor have to pay or share in a WC payment right out of company funds in this type of situation.
Most states require employers to have WC coverage beginning with a minimum number of employees. The minimum number of employees in a company that has subcontractors may be an unknown factor.
Companies have been fined for not having WC insurance when they thought they had only one or two employees! If your company has less than the minimum required by the State, and you do not have WC insurance, once again you may be sharing in a subcontractor’s WC claim right out of company funds.
When you work with subcontractors always:
- Obtain certificates of insurance from all subcontractors who have their own WC policy. Look over the certificates very closely. Make sure the policies do not expire before the end of the subcontract.
- Avoid using uninsured subcontractors?? We have been asked at conferences, presentations, and during consultations with our clients if their company should avoid using uninsured subcontractors. We usually advise an employer to go over all of the costs and benefits and then make a business decision.
- Remember to factor in the cost of covering an uninsured contractor into your company’s contract with the subcontractor. The cost may be very hard to quantify. The avoidance of paying a claim for an uninsured subcontractor’s employee will be well worth the time spent.
- When you have any type of payroll audit, make sure the auditor knows these people are subs with their own WC insurance. Your company could be paying for a subcontractor’s WC coverage when the subcontractor already has coverage in place.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.