Why Does My Subcontractor Need New York Workers Comp Insurance?

When you receive an unexpected workers compensation audit bill because your subcontractors didn't carry their own insurance, it can strain your business finances.

Many Central New York contractors, especially sole proprietors and single-member LLCs in painting, carpentry, or remodeling, face this challenge when they need extra help on projects. You want to build strong business relationships with reliable subcontractors while staying compliant with insurance requirements.

At the Horan insurance agency, we work with Central New York contractors to discuss how subcontractor insurance status affects their workers compensation coverage.

In this article, we'll explore why subcontractors should consider workers compensation insurance, what happens during audits, and ways to handle insurance verification.

How Uninsured Subcontractors Can Impact Your Workers Compensation Costs in Central New York

During your annual workers compensation audit, insurance carriers examine all payments to subcontractors. If your subcontractors lack their own coverage, those payments count as your payroll—regardless of whether you issued 1099s or paid cash.

Consider this scenario: You own a flooring business in Utica and paid three subcontractors $30,000 each last year. Without proper workers compensation certificates from these subcontractors, the auditor will add $90,000 to your payroll calculations. This additional exposure can lead to significant premium increases.

What Happens When Insurance Carriers Discover Uninsured Subcontractor Work

Insurance companies view subcontractor relationships with extra scrutiny because:

• Work activities can vary widely in risk level
• Carriers struggle to assess risk without formal employment relationships
• Many carriers would decline coverage if they knew about extensive uninsured subcontractor use
• These situations often result in both audit charges and coverage concerns

Why Subcontractor Injuries Create Complex Liability Issues for Your Business

Without proper workers compensation coverage, workplace injuries involving subcontractors can affect multiple parties:

1. The injured subcontractor may seek compensation from your insurance
2. If your coverage proves insufficient, they might pursue claims against your client
3. Your agreement with the property owner makes you responsible, regardless of who performs the work

For example, if an uninsured subcontractor falls while working at a client's home in Liverpool and suffers injuries, the resulting medical bills and lost wages claims could impact both you and your client.

Steps to Consider When Managing Subcontractor Insurance Requirements

Consider these practices when working with subcontractors:

1. Request current workers compensation certificates before starting work
2. Keep certificates on file for audit documentation
3. Make insurance verification part of your hiring process
4. Include insurance costs in project planning

Why Working With Insured Subcontractors Helps Maintain Stable Coverage

The stress of managing subcontractor relationships while trying to maintain affordable workers compensation coverage can feel overwhelming. Many contractors assume their 1099 workers don't require coverage, only to face unexpected audit bills and potential coverage concerns.

The Horan insurance agency works with multiple carriers and is available to discuss subcontractor insurance requirements and documentation options.

Click the Get a Quote button below to learn about workers compensation coverage options from an agency familiar with Central New York contractor insurance requirements.

Now learn more about commercial insurance audits.