Insured Solutions
Insured Solutions

What can you do if you hire a contractor and their employee is injured?

Contracting with an outside company can be a risky proposition when it comes to workers’ comp. But there are steps that the prepared employer can take.

Employers should always require a WC certificate from vendors or contractors before any work begins. The certificate covers every worker on site throughout the project.

But it’s not that simple. Issues can arise if the owner of the vendor or contracting company is directly engaged in work but has chosen to exclude themselves on the workers’ comp policy (which, by law, they can do) and then they get hurt on the project.

The company that hired the contractor may have assumed that with a certificate the contractor/owner was covered, but assuming doesn’t make it true. Initially, a quick check with the agent who wrote the policy (shown on the certificate) before work begins can establish the certificate’s validity including whether or not the owner(s) are covered.

But checking doesn’t stop there. Employers must also make sure the certificate has not expired and will not expire during the term of the project. Employers should also check periodically (quarterly) to be sure a certificate hasn’t lapsed due to non-payment – don’t rely on insurance carrier notices, they may be slow to send out this information.

If the certificate has expired and there is a workplace accident, the employer hiring the contractor will get dinged for the workers’ comp claim. A little time checking paperwork is much better than filing workers’ comp claims.

PEOrelationships typically exclude coverage of any individual not identified on a reported payroll. So if a vendor/subcontractor is injured and has no workers’ comp insurance, the PEO’s WC policy is not liable in most states since liability is defined under a CSA (Client Services Agreement), which means the client of the PEO (company and/or owners) are liable under workers’ comp.

To cover the bases, employers within a PEO using smaller 1099 contractors should think about getting a minimum premium policy or “If Any” policy under a different corporate/owner name where checks are written for payment to cover miscellaneous contractors’ employees who may be hurt on their work site(s). The reason for a separate name is that states prohibit two workers’ comp policies on the same entity and since the 1099 contractors are not employees, they cannot be added to the payroll of the first company as employees under WC.