In the world of construction, hazards are everywhere — from towering scaffolds to fast-moving machinery. But there’s one invisible danger that can cost you far more than a broken tool or delayed project. It’s the liability lurking in your subcontractor relationships, and it could be bleeding your bottom line without you even knowing it.
What if we told you that your own workers’ compensation (workers’ comp) insurance could be footing the bill for injuries sustained by workers you didn’t even hire directly?
Sounds unfair, right? Unfortunately, it’s true.
The Legal Reality: Liability Without Direct Employment
When a general contractor or company hires a subcontractor who doesn’t carry valid workers’ comp insurance, they may unknowingly take on a tremendous legal and financial burden. Courts across the country have repeatedly ruled that if a subcontractor’s employee is injured on the job and lacks proper coverage, the responsibility often falls to the next entity up the chain — which could be you.
This applies even if the injured worker is not a direct subcontractor, but a third- or fourth-tier contractor. If no one else in the chain has valid coverage, the courts could land on your company’s workers’ comp policy as the one that must pay the claim.
Let’s break this down: if a roofer hires a painting subcontractor, and that painter hires a flooring specialist — and none of them have workers’ comp — you as the original hiring company could be held liable if the flooring specialist’s employee gets injured on your job site.
Why This Happens: Control and Chain of Command
A major factor that influences court decisions is the degree of control your firm has over the subcontractor’s employees. If your company directs how, when, or where the subcontractors perform their work, you could be seen as having enough authority to be considered an employer for workers’ comp purposes.
Courts don’t just look at contracts. They look at the reality on the ground: who’s giving instructions, managing schedules, enforcing safety protocols, and providing tools or materials. If it walks like a duck and quacks like a duck — in legal terms, if it acts like an employer — it just might be treated like one.
How to Protect Your Business
Fortunately, there are proactive steps you can take to avoid falling into this expensive trap.
1. Require Certificates of Insurance
Always request a certificate of insurance (COI) from every subcontractor you work with. This document provides proof that the subcontractor has a valid workers’ comp policy in place. But don’t stop there.
2. Verify the Certificate
Too many companies take a COI at face value. Don’t be one of them. Pick up the phone and call the insurance company listed on the certificate. Ask them to verify the coverage, including its expiration date and the scope of the policy.
3. Monitor Policy Status
Even if a COI is valid today, that doesn’t mean the policy will stay active throughout the project. Insurance can lapse due to non-payment or cancellation. Consider implementing a system to routinely check on the status of your subcontractors’ policies — monthly checks during the project are a good standard.
4. Use Licensed Subcontractors
Check with your state’s contractor licensing board to confirm that your subcontractors are licensed and carry valid workers’ comp coverage. Most states provide online tools to look this up quickly. A licensed contractor is far more likely to carry the appropriate insurance and meet legal requirements.
5. Put It in Writing
Your subcontractor agreements should include explicit language requiring active workers’ comp coverage and indemnification clauses that protect your business. This won’t prevent all problems, but it strengthens your legal position if things go sideways.
6. Educate Your Project Managers
Make sure everyone in your organization who deals with hiring or supervising subcontractors is aware of these risks and responsibilities. A simple oversight at the site level could turn into a six-figure lawsuit.
Real-World Consequences
Imagine this: you’re running a major renovation on a commercial building. A subcontracted welder — hired through a third-tier painting contractor — falls from a lift and suffers a serious injury. The worker sues for workers’ comp. The painting contractor has no coverage. The welder’s direct employer has none. The court reviews the chain of command and sees your site supervisor giving instructions and coordinating schedules. Just like that, the claim lands on your policy.
And it doesn’t stop there. One major claim can cause your workers’ comp premiums to skyrocket, potentially making your business less competitive in future bids. It can even lead to increased scrutiny from your insurer or, in extreme cases, non-renewal of your policy.
Prevention Is Protection
Protecting your company from unnecessary liability is not just good practice — it’s a business necessity. With proper diligence, strong contracts, and consistent verification, you can build a safety net that extends beyond job site injuries and into your financial health.
The cost of prevention is a fraction of the cost of a single uncovered claim.
About BGES Group: Your Construction Risk Experts
At BGES Group, we specialize in protecting construction businesses across the Tri-State area. With decades of experience in the industry, we understand the ins and outs of workers’ comp, subcontractor liability, and the challenges that contractors face on every job.
Our team works with you to assess risk, review subcontractor agreements, and ensure your insurance policies are watertight — so you can focus on building, not battling lawsuits.
If you’re looking for expert guidance and peace of mind, BGES Group is the partner you need on your side.
Contact us today to learn more or schedule a consultation:
📞 (914) 806-5853
📧 info@bgesgroup.com
🌐 www.bgesgroup.com
Let BGES Group help you build with confidence — and without surprise liability.