I am a small drywall contractor. About a month ago I called a person who has helped me off and on through the years to help me hang drywall at a house. The first day he helped me he fell and broke his arm. Pekin Insurance has denied the claim on the basis that he was an independant contractor. However he has no insurance or work comp waiver. Through the years at audit time my insurance has required premium coverage on any contractor without insurance.
Are there actually two rules? One if you get hurt and one if you don't?
What are my options? I do not like the possible exposure to lawsuit to me and to the homeowner.
friesen - you may need to read through your WC Insurance policy. If it says that the contractor is covered if they don't have WC coverage then you can fight it saying that your policy covers the worker.
Hope that helps some.
Pooh is right. Check your policy, and you may also want to call your state workers comp division to see what the rules say about construction coverage. Without knowing your state no one will be able to give you specific info.
If you just called this person to work for you and you were paying them directly, then I don't see how it could be denied. Were you paying him, or a company entity owned by him? Love your question about two rules. I often joke that car extended warranties cover anything right up until it breaks, and breaking voids the warranty. Some IC's are the same way.
If you can tell us the state and payment arrangement we can probably give better info.
did you pay premium on the injured worker?
did you have an in force work comp policy for your other workers?
coverage may also depend on which state laws cover the employment.
the employee can file an appeal of the denial.
I forgot to mention that I am in Indiana.
He and I had not talked about payment arrangements. I have not directly paid a premium on him because in Indiana you pay over your original premium when you get audited by your insurance company at the end of the year. Two plus years ago I used him and paid him with a 1099, but he had been on another companies payroll within the past three months.
You may have a problem. I am assuming you have no employment paperwork, and that this was a casual arrangement. In Indiana, independent contractors and independent contractors in the building and construction trades are not covered under workers comp.
You have a history of treating him as a contractor, as the 1099 indicates. Both you and the homeowner may have liability here, but you are are on the front line. In the future, I would require all such people with whom you employ in this manner to show proof of insurance.
I am a little confused by your point about waiting to be audited to have your premium adjusted. Do you have other employees, or are you the only one on the policy? If that is the case, and he had not been hurt, would you have issued him a 1099 and then treat him as a contractor (thereby avoiding additional premiums)? If that is the case, get a good lawyer. Not only do you have liability for the injury and subsequent lost wages, you may have violated state law.
The Indiana Worker’s Compensation Board may pursue court action against an employer who fails to carry insurance. The court will have the authority to order an employer to cease doing business in Indiana until the employer files proof of insurance coverage with the Board. The court may also order the employer to provide proof of financial ability to pay any claims and to deposit a security, indemnity, or bond with the Board to secure payment for any injuries occurring during the lapse of insurance coverage.
Finally, an employer who fails to carry insurance commits a Class A Infraction punishable by fines and imprisonment. Upon written referral from the Worker’s Compensation Board, employers failing to carry insurance can be prosecuted in the county in which an employee was injured.
Because of the nature of Indiana worker compensation I have always made it a point to make sure that I report all 1099 contractors that don't carry their own insurance thus incurring an additional premium if it comes in over the minimum. You say in Indiana that independant contractors are not covered. However, you are required to pay premiums on any contractor without a Indiana workers compensation waiver.
Require every one that works under me to carry insurance? This is Southern Indiana and very few drywall hanging subcontractors carry the proper insurance. That is partly why I carry insurance so that the homeowner and builder do not have to assume liability.
Ok, I understand what you are saying, and you are smart to carry the insurance. But in this case it appears you are not covered. Odd, if you have covered people prior who have been paid as a contractor (1099).
Did this person have a WCE-1 filed with the state? (WORKER’S COMPENSATION CLEARANCE CERTIFICATE APPLICATION) If so, that will remove your liability.
You should still speak with a lawyer, to make sure your insuror isn't just playing a gray area to their advantage. Also take 1171's suggestion and have the employee appeal the denial, in the event he has not filed as an independent contractor.
if you have an in-force policy for your other employees and they deny coverage for this employee I think you have legitimate complaint. the denial of coverage gives the employee the right to pursue a civil suit against you.
Independent Contractor status is the most disputed area of coverage in comp. you may want to have your business atty contact the carrier's legal department to review the decision.
you should certainly contact your insurance broker who may do more business with the carrier and have more leverage to get the exact facts that were used to determine the injured was not an employee.