In California contractors are liable for workers compensation benefits to uninsured subcontractors employees. This usually leads to surprise by the contractor along with a hefty bill from the auditor at the end of the policy period. This bill reflects the exposure and payroll of work done by the uninsured contractors employees. This is done by using a formula with the employees payroll and exposure of work done to get a premium that is added to the contractors premium at the time of audit. For example; you are a contractor and hire a plumber for a remodel job that last several months. During that time the plumber has two employees working on the job that have a total payroll of $20,000 on that job. At the time of the contractors audit by its workers compensation carrier, the auditor would take that $20,000 payroll from the uninsured sub and use the work comp. rate of plumbers to add an estimated $2,100 to the contractors base premium. For this reason it is important to always obtain a certificate of insurance from your subcontractors. Always make sure to check the certificates expiration dates and be sure to request a new certificate if the current one expires during the time work is being done.
Here at Mitchell & Mitchell Insurance Agency, Inc. we can take care of your uninsured subcontractors and place them with strong carriers to assure you won’t have any surprises come your audit. Please comment if you’ve had this predicament sprung on you at audit.
DJ McKenna, CLCS, CRIS
Mitchell & Mitchell Insurance Agency, Inc.