Uninsured Subcontractors

We've noticed a disturbing trend with a number of commercial clients recently - many workers' comp injuries are coming from uninsured subcontractors. These are typically one-man operations who have done work off and on for the company for years. Some have retired and are just coming back to do some part-time work.

If the subcontractor is insured with his own workers' comp policy, there's nothing wrong with this arrangement. The problem comes when he isn't. Here's why:

When the subcontractor isn't covered by his own policy, he falls under the policy of the employer. Any on-the-job injuries fall under the employer's workers' comp policy, which will directly impact their experience modification factor.

We have seen injuries of this type exceed $100,000 (that amount is comprised of medical costs and lost-time wages). How a $100,000 claim impacts your experience mod depends on your size and industry, but it can easily increase by 30% or more. All for an injury for which you shouldn't be paying a dime.

It's one thing if you were able to have the same controls in place for a subcontractor that you would have for a full-time employee (e.g., strict hiring practices, training, etc.), but the inherent differences between 1099 and W-2 arrangements prevent you from doing that.

So what's the solution?

Create a policy that states that all subcontractors must provide certificates of insurance. If they can't provide it, don't use them. If the work of that sub justifies the cost, you may offer to cover the cost of the policy.

If you have any questions about the mechanics of this process, don't hesitate to contact us. We'll be happy to walk you through your options.