Workers Comp Word Of WARNING
A word of warning for the Workers Comp ladder of insurance (c).
There are two main situations where we have seen Workers Comp cause the premature demise of a business, especially small businesses.
- Not being familiar with the laws concerning the number of employees that require a Workers Comp policy. You may not have to have Workers Comp insurance with up to five employees in a certain state while other states require a policy with one employee. This is a quick way to hear from the Insurance Commissioner with a cease and desist injunction order.
- Similar to #1, an employer that hires subcontractors may be on the hook for a claim if a subcontractor is injured. Make sure your contractors show you a certificate of insurance.
Let’s say that you do not have enough employees to require your company to have Workers Comp insurance. You have contracted with a company that has seven employees but does not have Workers Comp insurance. The term that I have coined – The Ladder of Insurance(c) will apply.
The Workers Comp courts will start with the sub and move their way up the ladder of companies until there is Workers Comp insurance or the deepest pockets. What will happen in this case is that the court will rule against you for benefits. So, you do not have Workers Comp insurance? Well, you will need to dig deep and pay cash or sell everything in the business and pay the claim.
Let’s say that you do have Workers Comp insurance but the same situation applies. The Workers Comp courts will find you liable as the sub did not have their own insurance. You turn the claim into your Workers Comp insurer and THEY DENY COVERAGE. Remember, you did not pay premiums to cover the sub. Once again, it is time to pay straight cash.
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