Workers’ Compensation and Liability Insurance: be sure and protect yourself.
This is a brief summary of what you need to know about protecting yourself from lawsuits brought by someone working on your property.
Failure of a contractor to have workers’ compensation insurance on his/her employees is a criminal offense punishable by 60 days in jail, a fine of up to $10,000, or both. Hiring such a contractor will put you and your home at serious financial risk.
If a homeowner hires a contractor who has no workers’ compensation insurance, it is considered negligence on the homeowner’s part. In this situation, if a contractor’s employee is injured, all medical bills and claims for lost wages are now the responsibility of the contractor AND the homeowner. A contractor who does not have workers’ compensation insurance probably has very few assets, so most, if not all of the financial costs will be on the homeowner. For a serious injury, medical payments upward of $1 million are not uncommon. Your dream of making your house a safer place to live can result in a legal nightmare and cause you to lose your house altogether. On the other hand, if the contractor has workers’ compensation insurance then the insurance company will takes care of it and both you and the contractor have nothing to worry about. Workers’ compensation insurance is no joke, and hiring someone without it could force you into bankruptcy.
How do I know if my Contractor has Workers’ Compensation Insurance?
Easy. Go the Contractor’s State License Board website, put their contractor’s license number in the search box on the right. On the results page you will find the name of the insurance company and the expiration date. If you do not see a company listed, or the insurance has expired, this means the contractor does not have workers’ compensation insurance and is operating illegally.
What if my General Contractor hires a Sub-Contractor who has no Workers’ Compensation Insurance?
In this case the liability falls on the general contractor for not exercising due diligence in making sure the sub-contractor has workers’ compensation insurance. The general contractor’s workers’ compensation insurance will not cover injuries sustained by a sub-contractor’s employee. If the general contractor has workers’ compensation insurance, only his direct employees are covered and not the subcontractor’s. In this case the responsibility for medical bills and lost wages now fall on the sub-contractor AND the general contractor personally. Without insurance these contractors can easily be forced into bankruptcy. If you are a contractor it is very important for you to make sure all sub-contractors provide you with up-to-date workers’ compensation insurance certificates.
Contractor’s Liability Insurance
You can be held responsible if someone is injured on your property for reasons that could or should or should have been under your control. For example, if a third party, or uninsured employee, happens to fall on an uneven sidewalk, or trips over an extension cord in your garage and is injured, you are responsible for those injuries. Similarly, if someone comes over to your house and falls over a piece of equipment that the contractor brought to your home, you can be hit with huge legal and medical bills unless your contractor has liability insurance that will cover these expenses. This is also the case if a child hurts himself by turning on a saw that the contractor left at the house. The possibilities for injury are endless to third parties are endless. This is both workers’ compensation and liability insurance are so important.
- If anyone on the job site is injured and files a liability claim, an attorney will usually name everyone as a defendant no matter how remotely involved. That means the sub-contractor, the general contractor and the homeowner. Liability will be distributed to the defendants based on the percentage of liability a court decides they have. Any defendant who has liability insurance will be protected by that insurance. You, as the homeowner, want the lawyers to go after your contractor’s liability insurance.
- If a liability claim is filed because of something an uninsured sub-contractor has done, liability will fall on the general contractor for not making sure the sub-contractor had insurance. At the same time, the general contractor’s insurance company will hold the sub-contractor liable for the settlement they had to pay on the general contractor’s behalf. The homeowner probably won’t need to pay anything so long as he made sure the general contractor had insurance.
- If the general contractor does not have liability insurance and there is a claim, you will be held co-liable for not making sure the contractor had liability insurance. Your homeowner insurance will probably protect you up to $100,000, but after that it will be on you.
In short, if you are a homeowner make sure the general contractor carries liability insurance! Better yet, as far as possible make try sure all sub-contractors also have liability insurance.
If you are a general contractor carry liability insurance and make sure all sub-contractors have liability insurance.