Workers’ Comp Claim for an Excluded Owner

One of our builder insurance clients recently posed the following question: Could a builder who is excluded under his own policy be stuck with a workers comp claims for the owner of a subcontracting company who is not covered under his own Workers’ Compensation policy?

According to the South Carolina Workers’ Compensation Commission, it would be rare for an injured owner of a subcontracting company to be successful in tapping into coverage under a general contractor’s Workers’ Compensation policy.  The injured owner would have to prove that he is an employee of the general contractor.  This may be difficult short of a situation where the general contractor is just calling the subcontractor an independent contractor to evade paying payroll taxes.

My advice to our builder clients is this:

It is best if the owner of the subcontracting company is covered under his own Workers’ Compensation policy.  It is very common for them to not be covered.  It is an acceptable risk in my opinion for the builder to accept a certificate of insurance showing that the owner is not covered.  It may be helpful for the builder to have a provision in his contract with the subcontractor to the effect that the subcontractor understands that he is not entitled to benefits under the builder’s Workers’ Compensation policy and that no premium has been deducted.