Workers’ Compensation Coverage for Contractors and Subcontractors
Workers’ Compensation Insurance for Contractors and Subcontractors: Always Request a Certificate of Insurance
When considering workers’ compensation coverage in the area of contractors and subcontractors, it is always important to make sure you know what the requirements are under the North Carolina Workers’ Compensation Act.
N.C. Gen. Stat. § 97-19 sets forth the liability and defenses for principal contractors as it relates to subcontractors and what principal contractors must obtain from subcontractors prior to subletting work under the NC Workers’ Compensation Act. As demonstrated in a recent unpublished Court of Appeals opinion[1], it is important not only to ensure that your coverage as a contractor does not lapse, but also that your subcontractors’ coverage does not lapse. This newest case is summarized below, but we encourage any adjusters who have any questions regarding coverage issues or disputes to contact one of our experienced workers’ compensation attorneys.
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Juan Gutierrez-Bojorquez (“Gutierrez-Bojorquez”) worked as a subcontractor for Robco Residential Construction (“Robco”), a general contractor, for many years. Robco required all subcontractors to provide certificates of workers’ compensation insurance, and also notified all subcontractors within 30 days of their policy lapsing. Gutierrez-Bojorquez first obtained workers’ compensation insurance through Peebles Insurance Agency in 2012. In July 2014, Southern Insurance Company of Virginia (the carrier for Peebles), issued and mailed a cancellation notice for Gutierrez-Bojorquez’s April 2014-April 2015 workers’ compensation policy due to non-payment of monthly premiums.
In 2015, Gutierrez-Bojorquez went to renew his workers’ compensation policy through Peebles and was informed that his previous policy had expired due to failure to pay the 2014 monthly premiums. Peebles attempted to rewrite a workers’ compensation policy with one of Southern Insurance’s subsidiaries, Northland. Northland ultimately rejected the policy that Peebles attempted to rewrite. An employee of Peebles attempted to contact Gutierrez-Bojorquez and left him a voicemail informing him that Northland declined coverage and that he would have to obtain workers’ compensation insurance elsewhere. Peebles did not have any further communication with Gutierrez-Bojorquez until May 2016.
In April 2016, Robco notified Gutierrez-Bojorquez that his policy would lapse on April 15, 2016. Gutierrez-Bojorquez called Peebles to pay his bill and expected Peebles would send the new certificate of insurance to Robco as they had previously done. Octavio Nambo Suazo (“plaintiff”) was injured on April 28, 2016, while working for Gutierrez-Bojorquez. Gutierrez-Bojorquez returned to Peebles to report plaintiff’s injury. Peebles was eventually able to procure a workers’ compensation policy for Gutierrez-Bojorquez through the North Carolina Rate Bureau. The NC Rate Bureau did not reflect workers’ compensation coverage beginning for Gutierrez-Bojorquez until May 7, 2016.
Plaintiff filed a workers’ compensation claim. On June 17, 2019, the Commission issued an Opinion and Award finding that Gutierrez-Bojorquez was uninsured at the time of plaintiff’s accident and that Robco became plaintiff’s statutory employer pursuant to N.C. Gen. Stat. § 97-19, which entitled plaintiff to recover benefits from Robco’s insurer, Erie. Robco and Erie appealed. On appeal, Appellants Robco and Erie challenged the Commission’s finding that Robco was plaintiff’s statutory employer under N.C. Gen. Stat. § 97-19 and that Appellants were responsible for plaintiff’s injuries.
The Court noted that the main issue was whether there was any competent evidence to support the Commission’s finding that during the relevant periods from April 28, 2016 to May 1, 2016, Gutierrez-Bojorquez was uninsured. The Court held that the Commission’s finding was supported by the fact that Gutierrez-Bojorquez received multiple notifications that his policy would expire and that the day after he reported plaintiff’s accident, he discovered the policy had lapsed.
Appellants argued they were entitled to at least one of the three (3) affirmative defenses for a principal contractor under N.C. Gen. Stat. § 97-19. However, the Court concluded that none of the affirmative defenses applied to Appellants. Thus, the Court held that the Commission properly concluded that Robco was plaintiff’s statutory employer under N.C. Gen. Stat. § 97-19, and as such, Robco and Erie were liable for plaintiff’s compensable injuries to the same extent that Gutierrez-Bojorquez was liable.
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So what is the moral of this story? The principal contractor must obtain a valid certificate of insurance at the inception of every subcontract. Otherwise, a principal contractor will run the risk of being deemed the statutory employer. If you are an adjuster and have further questions regarding coverage issues, please contact one of our experienced workers’ compensation attorneys.
[1] Octavio Nambo Suazo, Employee-Plaintiff v. Juan J. Gutierrez-Bojorquez, Noninsured Employer, and Robco Residential Construction, Employer, and Erie Insurance, Carrier, Defendants. April 6, 2021. Unpublished.