Workers’ Compensation Insurance: What Large Construction Companies Need to Know

How can construction companies and contractors mitigate risk exposure to employee and independent contractor Workers’ Compensation claims?

Workers’ Compensation pays employees for medical expenses, compensation, and rehabilitation costs due to a workplace injury. Workers’ Compensation laws are state-regulated, with different exceptions and rules for each one. While a Builder’s Risk policy covers property throughout construction, Workers’ Comp insurance protects the company against monetary losses from a Workers’ Comp claim. 

According to the National Safety Council, the construction sector is considered one of the top four most dangerous industries. Workers’ Compensation insurance is a critical necessity for large construction companies because this line of business has a greater chance of workplace injuries.     

Read on to discover how construction companies and contractors can mitigate risk exposure to employee and independent contractor Workers’ Compensation claims with the proper insurance.

Safety is #1 for Construction and Insurance

Most large construction companies have been in business for a long time, and have active management with vast experience that comes from going through the good, the bad, and the different seasons of construction. Even with this experience, construction site safety is still a main challenge.   

In the construction industry, any type of back strain or pain associated with repetitive motions is common, which rotating jobs throughout the day can prevent. It’s also important to have a solid fall protection plan in place. Employees should understand the risk and all the steps they need to do to ensure they prevent those types of losses, including ladder safety. 

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Employees should also have the appropriate PPE, such as goggles, gloves, and steel-tipped boots to limit exposure to this risk. On-site management plays a key role in loss control, with daily supervision of employees and reminders to follow all safety procedures.

The safest construction companies will have more sophisticated and established processes in place around safety protocols, such as daily safety meetings, toolbox talks, a quality site safety plan, and training classes for new employees. Even with different safety procedures in place, accidents happen and the insurance provider evaluating your business for Worker’s Comp coverage will try to determine the likelihood that it’s going to happen by asking these questions:

  • What are the employees doing daily?
  • Who’s observing them?
  • Who’s supervising them?
  • Who’s managing them?
  • How many projects are they doing, and where are they doing them?

Did You Know: The history of compensation for bodily injury began with the Nippur Tablet No. 3191 from ancient Sumeria, which outlines the law of Ur-Nammu, king of Ur, in 2050 B.C. that provided monetary compensation for specific injury to workers’ body parts, including fractures.  – The Iowa Orthopaedic Journal

Put Up Guardrails Around Subcontractors

The intent of Workers’ Comp is to cover the employees of the company. Some large construction companies have different full-time crews that specialize in certain types of work, such as electrical, plumbing, or carpentry, so they may see an increase in the type of accidents because they have more employees spread out within a project.

More often than not, companies utilize subcontractors these specialty areas. When that happens, it’s critical to understand the importance of risk transfer and have the appropriate subcontractor agreements in place with the correct certificates of insurance. Subcontractors or independent contractors should carry their own Workers’ Comp policy to reduce the general contractor’s exposure.

“If there isn’t a solid risk transfer agreement in place, the construction company could be exposed to a situation where the subcontractor’s coverage lapsed, or there was miscommunication about who was supposed to cover it,” says Eddie Dreyer, a commercial lines underwriter at Central Insurance. “A strong subcontractor agreement is very beneficial in a claim investigation and for defense cost expenses.”

Questions an experienced insurance provider will ask to determine risk exposure include:

  • How are you verifying the independent contractor Workers’ Compensation policy?
  • Are you recording their certificate of insurance?
  • Is there a subcontractor agreement in place?
  • Do you have  legal counsel or an attorney reviewing the subcontractor agreement and ensuring it’s current?

Learn more: What kind of commercial insurance policy does my business need?

The Past Doesn’t Necessarily Affect the Future

When determining if or how best to cover a large construction company for Workers’ Comp insurance, the main factor at work will be to review the loss history or experience since the company’s operations began.

If there’s been a loss, it’s beneficial to know how the business remedied the situation and applied preventative measures for the future. There are situations where if there’s been a loss in the past and they’ve implemented or updated their safety program to prevent a similar type of future loss, that can positively influence  next steps. 

Trusted Experts for Workers Compensation Insurance

Central Insurance has the construction industry resources and experts to help you successfully navigate the complexities of workers’ compensation insurance.  Our team of hand-picked agents, experienced underwriters, and loss control construction specialists will ensure your company is fully protected from Workers’ Compensation risk so you can focus on building your business.

Get started by finding the closest agent to you, or learning more about Central Insurance.

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