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Subcontractors Need to Supply 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.

Picture Of Hand Presenting Small Subcontractors With Big Gold Coins

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 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.

Paying Subcontractors debt
Wikimedia Commons – Hloom Templates

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 companies?? 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.

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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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