Spring is here and summer will be arriving soon. No doubt you’re about to complete the plans for projects all around your homestead. You may be considering hiring a contractor or other professional to help you complete the various steps involved to complete those projects, big and small.
So what does this have to do with the topic of workers’ compensation and liability insurance? If you’re a low or modest risk-taker, it can be a big deal.
The Limits of a Homeowner’s Policy
Workers’ compensation laws protect people while they’re on the job. They’re designed to make sure that employees who are injured or disabled during the course of that job’s duties are provided with fixed monetary awards, removing the need for litigation.
Different states have different employment laws. But the California Labor Code essentially tells us that anyone working for a homeowner will be an employee unless you can prove otherwise. Furthermore, California law tells employers — the homeowner in this case — that they must purchase workers’ compensation insurance when any employee works for them.
The standard California homeowner’s policy, with liability insurance, includes coverage for “occasional workers’ comp risks.” This is intended to provide insurance for a gardener who swings by once a week, or a housekeeper who comes in twice a month, or other folks who perform small tasks at your home. The “occasional worker” is defined as someone who performs less than 10 hours of outside-of-the-house work or 20 hours of inside-of-the-house work.
If you, the homeowner, know you’re going to reach or exceed these thresholds, you should contact your insurance agent to change your homeowner’s policy to cover these new events. The costs for this change can vary considerably between companies, but it has been my experience that the additional charge is a fraction of the cost of worker’s comp insurance for a business operation.
The Risks & Threats Are Real
To illustrate, let me share a story with you about how careful you need to be.
A while back, I accepted a proposal from a contractor who advertised he was insured for liability and workers’ compensation insurance. We agreed that he would provide me with a certificate of insurance when he arrived at my home to trim and remove a tree.
When the contractor arrived, he gave me a copy of a certificate without the required insurance agent’s signature. The contractor said it must have been the agent’s oversight, so I decided to phone the agent to confirm the validity of the certificate.
The agent advised me that he no longer provided insurance for this contractor and that the document I had was not valid.
Obviously, the contractor did not perform any of the work we had previously agreed upon.
Here in California, had I allowed the contractor to perform the work, and had there been an injury to one of his workers, I would have been responsible for that person’s medical bills and other expenses. Also, if there was any property damage as a result of their operations, I would be writing the checks or trying to recover the expenses from the contractor through some legal means.
Request a Certificate of Insurance
How can you avoid these potential risks and threats, along with involvement in the insurance industry? Here’s a short list of steps to simplify your life and avoid becoming an employer:
- First, hire licensed and insured contractors who have their own workers’ compensation and liability insurance.
- Next, hire other service providers who are licensed, if appropriate, and insured.
Of course, any company or contractor you hire should have liability and workers’ compensation insurance. But how will you know they’re insured? Before any organization, business, or contractor begins work for you, ask them to provide you with a Certificate of Insurance.
A Certificate of Insurance is a list of the insurance policies that business has in place on that date. You’ll be able to see the names of the insurance companies, the amounts and types of coverage, the start and end dates for each policy, along with the insurance agent’s signature on the form. To further protect yourself as a homeowner, you should be listed as a Certificate Holder on the contractor’s Certificate of Insurance.
Specific Things to Look For
When a contractor gives you a Certificate of Insurance, there are two specific things you should look for. First, the liability insurance listed on the certificate should name you (the homeowner) as an “Additional Insured.” Being named as the Additional Insured means the contractor’s insurance will provide you with some protection through their policy should there be a claim, which may prevent your insurance from needing to be involved. The page of their liability policy that confirms this should be attached to the Certificate of Insurance.
Secondly, any contractor’s workers’ compensation insurance should show that the business has provided a Waiver of Subrogation Endorsement on their policy. This endorsement requires one party on the contract to waive their right to sue for and recover damages from the other party. In practical terms, this means that if a business’s employee is injured at your home, the workers’ comp insurance company paying for that employee’s treatment can’t come back to you, the homeowner, to recover what they have paid to the injured worker.
When in doubt, call your insurance agent to guide you through this process. There are many talented and knowledgeable insurance agents who can help you. So please ask!
As a California homeowner, you have a duty to be aware of the workers’ compensation rules to avoid fines and penalties. This knowledge can help you avoid legal problems in case a worker becomes injured on your property.
As previously mentioned, the laws differ by state, so it’s best for those of you living outside of California to contact your insurance advisor for guidance. Do this before starting any projects around the home that will require you to hire a contractor or other outside help to get the job done.
Our complimentary Risk & Threat Assessment can help make sure your company protects its employees and its tangible assets. For a free analysis, call 1-800-823-4852 x 8758 or email firstname.lastname@example.org for more information.
Be sure to visit my personal website for the “why” I do what I do, “what” I do, and “how” I do what I do: www.risksnthreatsmatter.com.