Insured Subcontractors and Workers’ Comp Insurance

Is it necessary?

The second most common myth regarding Workers Compensation for the construction industry is that Workers Compensation insurance isn’t required by builder who only use insured subcontractors and do not have any direct employees.

Like the other myths I will be discussing, this is not necessarily accurate.

Even if you have a current certificate of insurance on all of your subcontractors showing that they carry Workers’ Compensation, you are still not adequately protected.  In fact, all it means is that at the time the certificate was issued they had insurance in place.

If the subcontractor’s insurance is canceled after the certificate is issued, it is very unlikely you will be notified.  Neither the insurance agent nor the insurance company is legally obligated to notify you.  The certificate merely states that they will “endeavor to” let you know the coverage is no longer in force.  It is becoming more and more common for the subcontractor to obtain insurance in order to have the certificate issued, and then letting the policy cancel for non-payment.  The end result is that you will still end up with an uninsured subcontractor despite your efforts.

The best way to protect yourself and your assets is to purchase your own Workers’ Compensation policy and add the subcontractor classification codes on an “if any” payroll basis.