You’re Damned if You Don’t Make Sure Your Contractors Have Worker’s Compensation Insurance.

Posted: May 23, 2011 in Lawsuits, Worker's Comp. Insurance

A recent case from the Massachusetts Supreme Judicial Court shows the importance of worker’s compensation insurance, not only for your own company, but for any person or entity who does work for you. As set forth in Wentworth v. Henry C. Becker Custom Building Ltd., ___ Mass. ___ (May 23, 2011), G.L. c. 152, §18 provides that your worker’s compensation carrier will have to cover the injuries for any worker employed by any subcontractor that is not covered by worker’s compensation insurance. This is what happened to the defendant in this case, Henry C. Becker Custom Building Ltd. (“Becker”). Becker hired a subcontractor on a construction site. An explosion on the site resulted in the tragic death of the plaintiff and the serious injuries to his son, both of whom worked for the subcontractor. The subcontractor had no insurance, so Becker’s insurer had to pay. Although not reported in the case, this likely resulted in at least a back charge and increased insurance costs to Becker. In fact, insurers routinely conduct audits and can back charge companies for utilizing workers who are not covered by worker’s compensation insurance, even where there has been no injury.

In this case, Becker faced a double-whammy. Although its insurer settled with the plaintiffs, the plaintiff still brought a separate suit against Becker under the common law, arguing that, since Becker was not their employer, they were entitled to sue Becker even though they settled with Becker’s insurer. The Supreme Judicial Court agreed, and sent the case back to the trial court for adjudication of those claims. Although the plaintiff’s employer would be immune from common law suits, Becker was not the employer, even though its insurer had to cover the plaintiffs. The Court reasoned that Becker would be subject to suit even if it hired a contractor who had worker’s compensation coverage. Thus, it should not get a benefit of hiring a contractor who did not have such coverage. Ruling otherwise could actually encourage hiring subcontractors without insurance, which is the opposite of what the Legislature intended. A link to the case is attached.

By Adam P. Whitney, 617.338.7000.

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