When it comes to partnering with subcontractors, there is often confusion around who is responsible for workers compensation insurance. Do business owners provide the necessary coverage? Or should subcontractors come ready with their own? State laws vary, and to avoid unexpected liability, it’s important for an employer to know any obligations they might have.
Check out the video below to hear from Chris Grassi, MEM’s Premium Consultation Manager, as he shares what you need to know about certificates of insurance and independent contractors.
Know your state laws
Each state sets its own work comp requirements. Know what these requirements are for each state you work in – or plan to hire subcontractors from.
Many general contractors make a critical mistake. They think that if a subcontractor isn’t required to carry their own work comp insurance, they are exempt from liability. However, this isn’t the case.
Are you liable for injuries to subcontractors?
A general contractor can still be held liable for any injuries a subcontractor sustains while working on their project. This is true even when a subcontractor isn’t required to carry work comp coverage.
For example, a Missouri business owner hires a subcontractor to complete some plumbing work on his job site. The subcontractor doesn’t have any employees and isn’t legally required to get his own work comp coverage. If he’s injured on the job, then the business owner could still be held financially responsible for their injuries.
Protect your business: Always request proof of insurance
To protect your business, always request a Certificate of Insurance (COI) from any subcontractor you hire — even if they don’t have employees and aren’t legally required to carry coverage. This certificate shows they have work comp coverage, minimizing your liability risk.
If your subcontractor doesn’t have coverage and gets hurt on the job, you, as the hiring contractor, could be responsible for their medical expenses and lost wages.
Why should subcontractors carry workers compensation coverage?
Even if a subcontractor isn’t legally required to carry work comp insurance, it’s often a good idea to do so. Why?
- Many businesses won’t hire subcontractors without proof of insurance.
- If an injury occurs, work comp can protect both the subcontractor and the hiring contractor from costly medical bills and potential lawsuits.
Businesses that frequently hire subcontractors may also include work comp coverage as a standard requirement. Without proof of coverage, subcontractors may find it harder to secure work.