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Ghost Policies in Workers' Compensation Law

A common scheme: The landowner hires a general contractor. The general contractor hires a subcontractor. The subcontractor does not have adequate insurance coverage.

This can create a serious problem for workers injured on the job. In 2014, 4,679 workers were killed or injured on the job. Of all work injuries, 17 percent involved contractors, according to OSHA.

Under North Carolina General Statute 97.19, a contractor who hires a subcontractor without obtaining a certificate stating that the subcontractor has complied with G.S. 97-93 (requiring employers to carry insurance) can be liable to the same extent as such subcontractor would be for the payment of compensation and other benefits.

 A general contractor has two options to protect himself; ensure that the subcontractor has workers' compensation coverage and can provide a current certificate as evidence; or purchase a workers' compensation policy which insures all of it's employees, even those working as subcontractors. 

Under North Carolina Workers' Compensation laws an issue can arise when a sole proprietor or another business with no employees subcontracts. The general contractor would not be responsible for injuries sustained by the sole proprietor himself, but would be liable for any employees subsequently hired by the sole proprietor.

A general contractor can gain protection in this scenario by purchasing a ghost policy. A ghost policy provides coverage only if the sole proprietor subsequently hires employees. The sole proprietor is excluded from coverage under the ghost policy.

If you have been hurt on the job and have questions concerning workers' compensation coverage please contact our office for a free consultation.

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