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It was recently brought to our attention, that general contractors who use leasing/PEO’s for their workers' compensation may have an uncovered exposure. A general contractor (GC) has a Florida workers' compensation policy through a leasing arrangement. GC hired a subcontractor to provide all drywall services and received a Certificate of Insurance from the subcontractor providing evidence of Florida workers' compensation insurance. The subcontractor hired another subcontractor to provide lathing for the building.

Sometime in January 2008, an unknown person was purportedly hit in the eye by a piece of lathing and has a serious eye injury or blindness. Approximately 60 days ago, the GC received a letter from an attorney representing the injured party, who claims to have been hurt on the GC’s job site. The GC contacted the insurance company for the drywall subcontractor that was provided to him on the Certificate of Florida Workers' Compensation Insurance and is advised that the policy in question canceled for nonpayment of premium two weeks prior to the date of the purported injury. The GC then contacts the drywall contractor's subcontractor and they advise him that they never hired the plaintiff and have no record of this person ever working for them. Therefore, they will not or cannot provide any coverage. The GC then contacts his leasing company who he entered into a co-employer agreement to provide Florida Workers' Compensation Insurance. He is then told that only the employees reported on payroll have workers' compensation insurance and that the policy is not in the name of the GC, but in the name of the leasing company, hence no coverage.

So it appears that there is a gap in coverage as the GC may be held liable and will have to defend himself. So what is the moral of the story? General contractors who work with subcontractors should purchase workers' compensation policy in their name and forgo the “savings” that a PEO/leasing company may provide.

Disclaimer: The above description provides a brief overview of the terms and phrases used within the insurance industry. These definitions are not applicable in all states or for all insurance and financial products. This is not an insurance contract. Other terms, conditions and exclusions apply. Please read your official policy for full details about coverages. These definitions do not alter or modify the terms of any insurance contract. If there is any conflict between these definitions and the provisions of the applicable insurance policy, the terms of the policy control.