Workers’ Compensation Insurance is one of those things that usually is equated with a punch in the gut for most small business owners / contractors that want to do “construction” work. However, there are a few things you should know about Workers’ Compensation Insurance, and also a few things that make it absolutely necessary to ensure you have it.
Workers’ Compensation Insurance is not true insurance, it is a state-run system that pools together funds from businesses, that have employees, to ensure that the business is not overly burdened by an employee injury (i.e. it doesn’t cost the owner a ton of money), and also ensures that the injured employee receives money and benefits to compensate them for their injury and while they are recovering from their injury. Workers’ Compensation Insurance is not something that is purchased through an independent party, but actually coverage provided for by the State, that also uses the State Courts as a mediator to ensure that a person is actually injured, and that a business is responsible.
Who needs Workers’ Compensation Insurance coverage? Well, to answer that question for a contractor – or anyone (personally) or business that engages in any construction or contractor services or businesses – is that you have to have 1 employee. If you are a business owner in an LLC, then you have to have Workers’ Compensation Insurance for yourself, because in Missouri, you actually count as a person. So, in effect, if you engage in business and do any type of construction work in Missouri, you must purchase Workers’ Compensation Insurance from the State.
So, what if I don’t purchase Workers’ Compensation Insurance from the State? Well, two things happen. The first is that you could be civilly (i.e. a lawsuit for the amount of money a person loses because they are injured and the amount of money they pay in medical bills – which could be substantial). You could also be criminally liable for operating a construction business without purchasing Workers’ Compensation Insurance if one of your employees is injured because under Missouri law, it is a crime to engage in construction related business activity without providing Workers’ Compensation Insurance (if you have 1 or more employees, as mentioned previously). These criminal punishments are generally misdemeanors, however, even a misdemeanor in Missouri could result in a 500+ fine and 6 months in jail!
The second reason, and this is really important for the sole proprietor (i.e. single, non-incorporated owner who does “side work”), is that if you personally are injured on the jobsite, then your health insurance may not pay for your claim. There are organizations retained by health insurance companies that have the sole purpose of digging into claims and making sure that these injuries did not occur on the job site. If your health insurance company finds out that your injury occurred on a customer’s site several things could happen. First, they will deny your claim, and you will have to fight to have it covered. Second, your client could actually be sued by your health insurance company (if they have already paid the claim) for your injury. If your insurer hasn’t paid the claim, then you may have to actually sue your client’s home owner’s insurance company for your injuries. Why would you have to do this? Well, if you have a rusty nail in your foot, your tetanus vaccines could cost a few hundred dollars (which you wouldn’t have to sue for). Now, a second scenario, if you fall off a deck, break your leg, require 2 or 3 surgeries, pins and rehabilitation, your bills could be in the 10s or 100s of thousands of dollars. Your health insurance company won’t pay this if they find out you were performing construction related services in Missouri, and you will be responsible for these medical bills.
So, the bottom line is simple, if you do construction work in Missouri, purchase the legally required Workers’ Compensation Insurance because without it, you could go to jail, or you could end up having to pay all of your medical bills in the event you, or an employee (even if it is your idiot brother) is injured at someone else’s home or business.