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Sole Proprietor Covers Workers Compensation For 20 Employees


Sole Proprietor Covers 20 Employees Without Realizing It

Workers Comp sole proprietor covers 20 employees that are not their employees..  I am sorry that I skipped doing an article to finish up the Ladder of Insurance(c). The Federalization of Workers Comp surfaced again. I always want to post on that situation as soon as there is any type of change.

Vector Graphic Of Man On Ladder Fixing Sole Proprietor Covers Gold Coins Increase

When I do presentations, I like to bring up the situation where a sole proprietor may have 20 or more people on their Workers Comp policy and not know it. As I mentioned before, the Ladder of Insurance means that in a court situation, an uncovered liability will be covered by whatever insurance policy is in place. If a subcontractor has no policy in place and there is an accident, the courts will always go up the ladder rungs of the subcontractor-contractor relationship until a viable Workers Comp policy is found.

A sole proprietor has hired a company to remove a tree that is affecting their office. The subcontracting company does not have an insurance policy in place. The sole proprietor does not ask for a certificate of insurance. The uninsured tree removal company sends out 20 people to remove a very huge tree. If any of the tree removal employees are injured, who would end up paying for their claim?

Picture Training Sole Proprietor Covers Employees
Wikimedia – Robert Garstka

The subcontractor does not have a valid Workers Comp policy in place. The sole proprietor has a policy for themselves only. Where would the Workers Comp court place responsibility? They would likely use the policy of the sole proprietor. I do realize there are exceptions to this rule in certain states.

How does a sole proprietor take care of this situation? They need to obtain a valid and current certificate of insurance from the subcontractor not only for liability insurance but also Workers Compensation.

I have actually seen this scenario play out on a death claim. One extra point is that the sole proprietor should also call the agent listed on the certificate of insurance to make sure there is a policy in place.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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