Does a Subcontractor Need Workers Compensation Insurance?
Workers compensation insurance is crucial in the construction industry due to the nature of the construction industry brings about a high level of risk. Workers risk physical harm on the jobsite while subcontractors, general contractors, and even project owners may face the risk of litigation or monetary loss due to the unpredictable circumstances. Because of this, the subcontractor must take steps to protect his employees and also ensure that he himself is protected from costly litigation. All employees are entitled to workers compensation, and subcontractors are able to protect themselves by obtaining workers compensation insurance.
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What is workers compensation?
Workers compensation ensures that employees get compensated for their medical and/or disability payments should they incur an injury that is within the scope of their work.
Workman’s compensation is applicable for:
— Medical expenses
— Replacement income
— Legal expenses
— Compensation to surviving family members should the injury result in death
— Compensation for any permanent injuries
Workman’s compensation is NOT applicable for:
— Injuries that are purposeful or self-inflicted
— Injuries that result from reckless behavior
— Injuries that occur while intoxicated
— Injuries that are inflicted for reasons outside the scope of the job
— Injuries unrelated to the job
— Injuries from “acts of God” unless it was a high-risk environment in which an occurrence of this nature was likely.
What is workers compensation insurance?
Employers are legally obligated to provide safe work environments for their employees. Should anything go wrong despite these efforts, the benefits of workers comp insurance are two-fold. Workers comp insurance ensures that the injured party receives fair and complete compensation for his or her injury and any permanent damage, while also protecting the employer from any legal action taken against him.
Although workers comp insurance may not be required by each state, many general contractors or project owners require that subcontractor still have such an insurance in order to protect them from personal liability from the subcontractor or his employees. In this case, the subcontractor will be required to provide an insurance certificate proving that they hold insurance for workers compensation before being able to work with the general contractor.
With workers compensation insurance in place, the subcontractor can avoid paying costly medical, legal, and other compensatory bills when an employee is injured.
Some other benefits of the subcontractor having workers compensation insurance include:
— It ensures that the independent contractor can afford lawyer fees should they be necessary: The subcontractor is always risking litigation even if they are not directly responsible for damages. Insurance is vital for keeping the subcontractor covered and not having to cover these costs out of pocket.
— To meet requirements: It is almost always required, either by state law or by the project owner or general contractor, that the subcontractor has insurance. Additionally, subcontractors who have one or more employees have the same liability requirements as large firms.
— To seize job opportunities: Many general contractors refuse to work with uninsured subcontractors due to the extra liability that they bring.
More things to keep in mind regarding workers compensation insurance:
— It is always a good idea to contact a lawyer before signing any contract or obtaining any insurance.
— An injured employee cannot claim workers comp AND sue their employer.
— Only a small percentage (1-2%) of workers compensation claims are fraudulent.
— Workers compensation can be used for long-term injuries that result from repeated behavior such as exposure to dangerous airborne materials that result in an injury that occurs after the scope of employment.
Takeaway for the subcontractor
The subcontractor must first be aware of what the requirements for workers compensation insurance are in the state that he operates in. Should this state require insurance, the subcontractor must comply. Should the state not require such insurance, it is still beneficial for the subcontractor to obtain this insurance in order to be competitive for job opportunities and to protect himself from liability should anything occur resulting in litigation.