Worker Injury: Contracting to Prevent Liability in WA and LA
Every contractor is aware of the dangers present on the jobsite. There is considerable concern for every contractor that someone will get hurt on the job and such an injury will result in phenomenal liability, and potentially shut the job down.
While cautious contractors look to their own Worker's Compensation Insurance for assistance in these trying times, we are still faced with the qaundary of those workers down the contracting chain. As a contractor, are you responsible for the injury claims of workers and employees of your subcontractors? Maybe so.
Lets discuss Workers Compensation - and what you can do to limit your liability -
WC Law
Workers Compensation law is aplenty. Though each state has its own set of laws (genearlly compiled as part of a Workers Compensation Act), the law tends to be extremely similar. Laws are continually supervised and updated in accordance with recommendations from the American Bar Association (ABA), the International Association of Industrial Boards and Commissions (IAIBC), and the National Association of Workers' Compensation Judges (NAWCJ).
You can find a quick reference guide to the Workers Compensation laws at popular sites such as Workers Compensation Insurance. Com or for contractors in Louisiana, check out LA Works' site and for those of you in Washington, check out L&I's site.
In short - Workers Compensation provides the exclusive remedy for workers who are hurt on the job. The state acts creating this body of law were intended to prevent the excessive liability that spawned up in the early part of the 20th century.
Workers Compensation provides additional wages and benefits for those workers who are either permanently disabled or temporarily disable while on the job. Furthermore, those acts will generally provide attorneys for having to prosecute a claim against an employer who defends against it. Attorneys fees are controlled by the relevant state statute, but in some states fees can reach 40% of the recovery.
Protecting Your Company From Excess Liability
You are responsible for your own workers. There are no ands, ifs or buts about that rule. You are provided with recourse against phony claims, but in the event of a accident, you will be responsible for the damages awarded under the Workers Compensation Act. The best thing you can for your own workers is to (A) have sufficient insurance, (B) closely monitor job sites, (C) train supervisors on how to handle injuries and (D) keep a close eye on changes in the law. As long as you are an astutely prepared contractor, chances are that you will limit your liability for your workers' injuries.
But what about your subcontractors? There are two general problems stemming from using subcontractors on the job:
(1) Liability for injuries to their workers; and
(2) Liability for unpaid premiums
Subcontractors' Employees and Their Injuries: A Louisiana Study
In regards to the first problem, the Louisiana Workers Compensation Corporation - an outfit providing WC insurance to contractors - has excellent resources for contractors who fear being held liable for injuries to subcontractor employees. Unlike their own employees, contractors are unable to exert first hand control over subcontractor employees. Even implementing first rate safety procedures cannot prevent inevitable injury.
So, contractors an most effectively handle this liability in the contracting phase. There are two types of approaches to liability in this regard:
(1) Two Contracts Liability
(2) Direct Assumption Liability
Under the two contracts approach, a contractor is assumed to be the statutory employer of its subcontractor's employees. The two contract approach spurs from a contractor obtaining a contract to do work for a property owner or client. In turn, contractor hires a subcontractor to do work of his behalf. Because the contractor is the owner's, or client's, obligor, he is stuck with the responsibility of its subcontractor's employees.
The direct assumption appoach spurs when a contractor simply contracts to stipulate this scenario - essentially meaning that they intend to take on this role by covering each of the subcontractor's employees under their workers compensation plan.
You may ask why in the world a contractor would want to be responsible for another contractor's employees? Well, its mainly because that contractor understands the potential liability that could arise during the project, and that the Workers Compensation Act would limit those workers' claims against the contractor to the wage claims made against the contractor's insurance.
In either event, you as a contractor could be liable for these damages if your subcontractor does not have adequate insurance. Though your Workers Compensation insurance is certain to lessen the blow, the cost of paying claims for another contractor's workers are simply burdensome, harmful, and potentially project-threatening.
Therefore, a contractor should utilize the contract phase in order to obtain further rights with regard to the subcontractor's Workers Compensation insurance. A contractor should have clauses which require the following:
(1) that subcontractors provide copies of all WC insurance certificates, dated and renewed throughout the project;
(2) that subcontractors do not exclude coverage for their owners, directors or officers;
(3) that subcontractors provide the contact information for their insurance agent, or insurance provider, so that the contractor can confirm that premiums have been paid;
(4) that subcontractors shall indemnify and hold harmless contractor from any and all claims against contractor for injury to subcontractors' employees - regardless of the source of injury; and
(4) finally, that the contractor shall be entitled to withhold payment of contract sums until said documentation is provided and confirmed, and otherwise that payment may be back charged in order to ensure that premiums are paid.
Taking the initiative to ensure that subcontractors have adequate insurance can save you significant cost and damage in paying out another contractor's employee.
Unpaid Premiums of Subcontractors: A Washington Study
The second problem has been a major issue for contractors in Washington state. The Department of Labor & Industries has, over time, attempted to educate contractors on ways to limit their liability for unpaid premiums, through submissions of contractor guides on their website. But you can take simple actions to avoid this liability.
First, are you exempt? Under RCW 51.12.070, a contractor is not liable for the insurance premiums of its subcontractors if (a) the contractor is properly registered under RCW 18.27, (b) the subcontractor is properly licensed under RCW 18.27, (c) the subcontractor maintains a separate address, is taxed separately and has it own proper books and records, and (d) the contract is for construction work as described in RCW 18.27.010.
Otherwise, protect yourself by utlizing the rights granted to you by RCW 51.12, et seq. A contractor should obtain the Industrial Insurance (WA Workers Compensation) account number for each and every one of its subcontractors. By navigating the L&I website, you can check on the status of the subcontractor's Industrial Insurance account. A contractor is entitled to withhold payment of contract sums due in order to pay this liability. Remember to look at the account before delivering final payment of retainage, so that proper withholding will be timely.
Read through this L&I handbook for more tips on how to avoid double liability for these premiums.
A construction attorney can help provide you with better information on how best to word your contracts and provide the best protection for you and your business.
