Tag Archive | Loss Prevention

The Perils of Using Unlicensed Subcontractors

All employers in the state of California that use employee labor must purchase and maintain Workers’ Compensation insurance. This requirement extends to contracting with and hiring subcontractors.

Here are some steps you can take to better manage your insurance and safety program when it comes to working with subcontractors:

Selecting A Subcontractor

Before a subcontractor begins work, confirm they are licensed and insured. You should only contract with licensed and insured subcontractors. Not having valid Workers Compensation insurance coverage renders a subcontractors license VOID. (Business and Profession Code 7152.2)

  • Verify the subcontractors license: Contact the Contractors State License Board (CSLB). Visit http://www.cslb.ca.gov or call (800) 321-CSLB (2752).
  • Verify the subcontractor is insured: Request a copy of their Certificate of Insurance that demonstrates Workers’ Compensation (WC) and General Liability (GL) insurance us current and active.
  • Read the Certificate of Insurance and confirm the following:
    • Named Insured: Verify the certificate shows the subcontractors company as the named insured.
    • Types of Insurance Coverage: At a minimum they should have WC and GL coverage with limits of liability that adhere to the state minimum.
    • Dates of Coverage: Make sure the policy is active, that the policy has not lapsed, and the dates extend through the end of the project or contract
    •  Confirm Coverage: Call the subcontractor’s agent or the insurance company to confirm information
    • Request Updated Certificates of Insurance: If you work with the same subcontractors from year to year, mark your calendar to request updated certificates annually
  • What if a subcontractor is unlicensed and not insured?
    • “I’m a sole owner and exempt from insurance.” If this owner is working for you, most of the time they become a statutory employee and they would be covered under your Workers’ Compensation insurance policy
    • Also, CA Labor Code 2750.5 presumes that an unlicensed person who performs work requiring a license is an employee and not an independent contractor. Verify licensing and insurance coverage!

What an Uninsured Subcontractor Can Cost You

  • Legal Costs: The CSLB may initiate disciplinary action which may require you to hire legal counsel
  • Increase in Insurance  Premiums: As the uninsured subcontractor may be considered an employee, payments made to the uninsured subcontractor will be identified when your WC policy is audited resulting in additional premium.
  • Claims Experience and Increased Costs: Your WC Insurance will be responsible for any injury to the subcontractor and their employees. Any claims paid under your policy will negatively affect your claims experience and all claims paid will apply to your experience modification factor three years, which can increase your insurance costs.
  • Increase in Employment Taxes: You may be liable to the Employment Development Department for any unpaid contributions and tax withholding’s for the uninsured subcontractors employees
  • Loss of Coverage: Under the California Insurance Code Sections 311 and 359, when an insured has misrepresented or concealed facts that are material to the application for insurance, the underwriter may rescind coverage or cancel the policy. Review your WC policy application, did you say yes or no to the use of subcontractors or sublet of work without certificates of insurance?

If you need loss control information to improve your loss prevention efforts, contact me anytime to discuss.

-JK

8 Key Components of a Business Safety Program

A safe work environment does not happen by accident. A company’s management team must be fully engaged in creating, planning, implementing, communicating and making sure safety programs work and are designed to fit the business. Most importantly, employees have to understand their role in making their workplace safer.

Your company’s safety program should incorporate the following 8 key components:

  1. Demonstrate management involvement – Management must lead by example. A visible demonstration that you embrace a safety culture is imperative to its success. Provide the essential time, budget and resources to create and support a safety program.
  2. Communicate your safety plan clearly – Your safety plan must be published and available to all employees. Reminders and updates should be timely and effective. Allow employees to contribute their suggestions to making the workplace safer.
  3. Get everyone involved – A safety program is likely to be more effective when employees at all levels are involved. Standardized policies should outline responsibilities and accountability for all employees. Safety goals can become part of job descriptions and employee reviews. Safety committees can help ensure that safety practices are understood and reinforced throughout the company. Positive reinforcement of safe behaviors can be an effective way to help build the desired culture.
  4. Train your employees to work safely – Safety training should begin from the moment an employee is hired. Ongoing training is also essential to creating a safety culture.
  5. Review, revise, improve – A safety program should be dynamic, especially since most business environments continue to evolve. An effective safety program should be flexible enough to adjust to changes. Regularly review, evaluate and identify risks that could affect safety, and make the changes necessary to keep your workplace safe.
  6. Create safety standards – Each department should set safety standards through a Job Safety Analysis (JSA) to make sure every task is done correctly and safely. Recognize good safety performance, and cite and correct unsafe practices.
  7. Investigate every incident and accident thoroughly – Properly trained staff with experience in investigation, analysis and evidence collection should conduct an accident analysis as soon as possible after an incident. Report the claim within 24 hours to help ensure prompt response and injury management.
  8. Manage every injury – Even with the best safety program, an employee injury can still occur. Planning helps you to react immediately when an employee is injured on the job. Learn about five strategies that can help you put employees on the road back to productivity.

Initiating a comprehensive program can seem daunting, but I can help businesses like yours take the necessary steps to begin creating a safety culture. Insurance is only one piece of the puzzle. Effective risk management and loss prevention efforts go a long way to keeping insurance premiums down and other costs of doing business.

-JK

Source: Travelers Insurance

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