Top 10 Things to Know About Writing Workers' Comp for Contractors

Providing workers' compensation coverage for clients in the construction industry can be one of the greatest challenges to an insurance agency, but it can also be one of the most profitable. Contractors pay higher insurance rates and are subject to more state regulation than other businesses. They also have servicing needs (such as issuing certificates of insurance on a regular basis) that other accounts don't. If your agency has construction clients, here are the top 10 things you should know about writing workers' comp for contractors.

1. What kinds of businesses are classified as “construction?”

The Division of Workers' Compensation publishes a list of the 87 class codes that are considered to be in the construction industry. It's important to review the list because some businesses you might not think of as being in the construction industry, like landscaping, are considered construction for workers' comp purposes. Find the complete list in the Division's rule 69L-6.021, available at www.fldfs.com/wc.

2. Who in the construction industry needs to have workers' comp insurance?

If your client's business is in one or more of the construction codes, that business needs workers' comp if it has one or more employees. Corporate officers, limited liability company (LLC) owners, sole proprietors, and partners are all employees, but they may have opted out of the workers' compensation system. The only time a construction business does not need workers' comp insurance is if (a) the business is a corporation or LLC, (b) it has no employees, and (c) all owners have valid exemptions from workers' comp provisions.

3. Who has to have workers' comp coverage on a construction site?

All people working on a construction site must be covered by a workers' comp policy or they must have a valid exemption from workers' comp. There is no such thing as an independent contractor on a construction site.

4. Who can exempt out of workers' comp?

In the construction codes, the only people who can be exempt are those who own at least 10 percent of a corporation or LLC. Only three owners of a company can be exempt at any one time. Employees cannot be exempt from workers' comp.

5. How long are exemptions valid?

Exemptions must be renewed every two years, and the renewal process can take up to 30 days. The state Division of Workers' Compensation notifies all exemption holders when their exemptions are about to expire, but your clients should not wait until they receive their renewal notices from the state. Allowing an exemption to lapse can mean a visit from a state compliance officer and paying a premium on the officer's salary that was received while the exemption was expired.

6. What happens if my client does not file their annual report with the state of Florida?

Corporations and LLCs must file annual reports with the state of Florida. Companies that do not file an annual report will be dissolved by the state, and their exempt owners will lose their workers' comp exemptions. The annual report fee is $150 for corporations and $50 for LLCs, and the reports are due each year to the Florida Secretary of State by May 1. See www.sunbiz.org for more information.

7. What are the requirements for out-of-state construction businesses doing work in Florida?

An out-of-state construction business doing work in Florida must obtain either a Florida workers' comp policy or a Florida endorsement to its out-of-state policy to cover operations in Florida. Out-of-state companies cannot come to Florida and avoid paying Florida workers' comp premiums.

8. What is an OCIP?

An Owner Controlled Insurance Plan (OCIP), also known as a wrap-up, is a program in which the project owner provides insurance for all subcontractors on a job site. If the subcontractor already has workers' comp insurance, he may pay twice for the same coverage. However, if the subcontractor keeps payroll records adequate to determine the amount of payroll covered by the OCIP, the subcontractor's carrier will exclude the OCIP payroll from the subcontractor's audit.

9. How many days' notice does a carrier have to give an account before cancelling a policy?

A carrier may cancel an insured for non-payment of premium with only 10 days' notice, but at least 30 days' notice must be given for any other reason.

10. If a contractor hires subcontractors, who is responsible to provide workers' comp coverage for them?

Under Florida law, contractors are liable for the workers' comp for any subcontractors they hire without a proper compensation policy or exemption. Tell your clients to get a certificate of insurance or exemption card from everyone they hire on a job site. And don't stop there. Tell them to call the insurance company listed on the certificate of insurance to verify that the policy is valid. They also should register all of their subcontractors on the state's policy tracking database so they will be notified if one of the subcontractors has their insurance cancelled. To verify exemptions, they can check the state's proof of coverage database. Both databases are available at www.fldfs.com/wc.

Karen Phillips is the general counsel of the Florida United Businesses Association (FUBA) in Tallahassee. FUBA is a small business trade association and sponsors a workers' compensation insurance program for its members. She can be contacted at FUBA at 116 S. Monroe St., Tallahassee, FL 32301 or 850-681-6265.