Workers Compensation Insurance
Many homeowners who hire help are not aware of the potential legal hassles that can ensue when an accident occurs on their property. Workers, such as the kid mowing the lawn, the housekeeper tidying up your home for a big party, or the landscaper planting your annuals, could suffer an injury while on your property. After an accident, you may be financially liable for the worker’s injuries and disabilities, and your homeowner’s insurance policy may not cover you in the event of a lawsuit.
Employees vs. Independent Contractors
One of the factors used to determine if you are liable for a worker’s injury is whether the person is considered your employee or is a contractor (or subcontractor). As a general rule, whether a person is considered an employee or a contractor hinges on the amount of control you have over the worker. If you have the right to control what must be done and the manner in which it is to be done, the worker is probably your employee.
For example, you hire someone to care for your children and do light housework in your home. This worker follows your instructions about childcare and household duties, and you provide the supplies used to do the work. This person is your employee.
Generally, if the worker can control how the work is done, the worker is a contractor. A contractor usually uses his or her own tools and offers services to the general public in an independent business.
For example, you hire someone to care for your lawn. This person provides their lawn care services to other homeowners, uses their own tools and supplies, and hires and pays any helpers they need. Your lawn care provider is an independent contractor, not your employee.
Workers’ compensation insurance for employees
If you have employees (such as a housekeeper, gardener, nanny, cook, etc.), your state may require that you carry workers’ compensation insurance coverage for them. Even if you are not required by state law to carry workers’ compensation insurance, it may be wise to do so anyway. If an employee is injured, and if you have hired the worker legally and paid for workers’ compensation insurance, an injury claim would fall under that policy’s coverage. Otherwise, the claim would fall on you. Your homeowner’s insurance policy is not likely to offer any coverage in this event. If you are hiring regular help who could be considered employees, make sure you consult your insurance agent and/or your state Workers’ Compensation Agency about coverage.
Workers’ compensation insurance for independent contractors
Contractors, such as builders, landscapers, or other tradespeople, who work on or around your home, should be covered through their own (mandatory) workers’ compensation insurance, and any injury claims would be covered under that policy. If, for some reason, the contractor does not have coverage or has discontinued the policy to save on the premiums, you would be next in line to pay for a worker’s injuries and/or disabilities that occurred on your property (although you may be able to file a lawsuit against the contractor).
If you are hiring a contractor for a job on your property, ask for written proof of the following to cover worker injuries, property damage, and uninstalled materials:
- Contractor’s license
- Workers’ compensation insurance
- General liability coverage
- Proof of workers’ compensation insurance for any subcontractors working on your project
Check with the carrier listed on the proof-of-insurance certificate that the coverage is still in force. Verifying the contractor’s insurance coverage before the work begins can allow time for the contractor to correct any problem with lapsed insurance, or for you to find another contractor.
What your homeowner’s policy may cover?
In some states, homeowner’s insurance policies contain a provision or endorsement providing limited coverage for minors performing lawn mowing or other similar tasks requiring the use of power tools. Some policies specifically exclude domestic workers such as nannies or housekeepers, while others cover injuries of household employees only under the liability coverage section, so a lawsuit may be required before a claim is paid. Check with your insurance agent.
You may need extra liability coverage
In addition to the liability coverage provided under your homeowner’s policy, you may want to consider additional liability coverage to protect your assets in the event of a liability judgment that exceeds the limits of your homeowners insurance. Such coverage may be called an excess liability policy, or a personal umbrella liability policy. This type of coverage supplements the liability coverage provided under your homeowner’s policy.
Don’t forget to do reference checks on people you are considering hiring to work on your property. Reputable tradespeople should be willing to provide you with customer references. In addition, you can check with the Better Business Bureau to see if a business has received complaints (and if the problems were rectified). Your local building department can tell you if a particular trade requires certification or licensing, as well as the name of the local licensing body or official. Don’t forget to verify that any insurance policies held by a contractor under consideration are still in force contact the insurance company never rely on the company’s copy of a certificate as the policy may have expired.