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Are You Lending Your Work Comp Insurance? (And Why You Shouldn’t)

Lending Workers Compensation Insurance

Work comp insurance is pricey. It’s incredibly expensive if you’re in a high-hazard profession – like contracting, manufacturing, human services, etc.

The more likely one of your employees is to be injured on the job, the higher your work comp rates will be.

And once an employee gets injured, you can guarantee your costs are only going to rise!

But having a worksite injury isn’t the only thing that can cause your rates to increase.

Many business owners and employers don’t realize that they could be lending their insurance to someone who is not their employee. And if that person or even company ends up with a workplace injury, your work comp coverage and rates could be on the line.

As a Certified Work Comp Advisor, I work with businesses to control their work comp costs. 

As the second or third largest operating expense, work comp is expensive enough. And no business owner or employer wants to experience rate increases when it’s not their fault.

This article explains how you might be lending your work comp insurance to someone else without even realizing it.

How Businesses “Lend” Their Work Comp Insurance

Let’s imagine you’re a general contractor. You’re working on renovating an old building for a client. 

Your company specializes in most of the interior work. You’ll frame in walls, hang drywall, tile bathrooms, and on and on. 

What you don’t do is HVAC work. So you hire an HVAC subcontractor.

Hiring a subcontractor poses the number one risk for potentially lending your work comp insurance.

Subcontractors and Work Comp

When you hire a subcontractor to assist on a job, you need to ensure they have adequate insurance coverage. 

Where most businesses get in trouble is hiring a small contractor that doesn’t carry work comp insurance.

There is a myriad of reasons a small company may not have adequate work comp coverage in place.

  1. Sole proprietors generally cannot even get work comp coverage. 
  2. Some firms are exempt from purchasing work comp (due to all employees being family members, or maybe they have a religious exemption).
  3. Because work comp is expensive, many companies claim to utilize “independent contractors” instead of employees.


If you hire a subcontractor that doesn’t have work comp coverage, and they or one of their employees suffers a workplace injury, your work comp insurance will likely be forced to kick in on their behalf.

“How is that possible?” you might be thinking.

Case law in PA is set up so that any contractor doing work for you can file a claim under your work comp policy if it is the first available work comp policy.

In layman’s terms, that means that because they don’t have a policy and you hired them for the job, your policy is the first available policy for them to submit a claim.

An Example of Lending Your Insurance

Let’s go back to our earlier example. You’re a general contractor looking for an HVAC firm to help with your remodel job.

You run into a small HVAC company, Baily Brothers Heating and Cooling. This little company is run by two brothers, Dave and Mike.

You’ve seen some of their work and have confidence they will do a solid job for you. So, you give them the job.

One evening on the job, this two-man team is working on replacing the heat pump. First, they need to get rid of the old furnace. 

Dave is super responsible. His brother Mike, however, forgets things now and then. That night he forgets to cut the electricity before working on the old furnace. (I’m sure my brother Mike will repay me in one of his future articles. 😉)

You already know what happens. Mike electrocutes himself. His brother Dave hurries him to the E.R. 

The Consequences of Lending Your Work Comp Insurance

Like I mentioned earlier, this small company doesn’t have work comp insurance. And now, Mike’s little hospital trip is likely to end up on your work comp.

Once Mike’s injury is submitted to your insurance, your work comp will likely go up. 

But that’s not all. You might also find that:

  • This injury will raise your experience modifier.
  • Your premium rates increase.
  • Your current insurance provider might drop you.
  • You will probably be charged extra at the audit because you have a claim filed by someone not listed as your employee.
  • You may be denied a new work comp policy.
  • You could even lose other potential job contracts because of a higher experience modifier.


The consequences of lending your work comp insurance can be extensive and long-lasting.

One work comp claim will have an impact on your insurance for the next three to five years!

How can I make sure I’m not lending my work comp insurance?

You can take some simple steps to prevent a subcontractor from borrowing your work comp insurance. 

#1 Certificate of Insurance

Require all subcontractors to provide you with a certificate to verify their workers’ compensation insurance

#2 Additional Insured

Request that your subcontractors add you to their policy as an additional insured.

**Most people know to ask to be listed as an Add’l Insured. Still, most people do not know that particular language will determine whether that piece of paper (Certificate) will actually protect you or not!

#3 Contractual Protection – Indemnification & Hold Harmless

Use a contract or purchase order with legal language that will give you additional protection.  Consult with an attorney to help you with this.

#4 Contractual Protection – Waiver of Subrogation

Use a contract or purchase order with the correct legal language that will give you additional protection from lawsuits coming back against you.

A Certified Work Comp Advisor will also have the resource to help you put the protection you need in place when working with a subcontractor. 

Are you ready to work with a Certified Work Comp Advisor?

Working with a Certified Work Comp Advisor (CWCA) is the best investment you can make for your work comp program. 

A Certified Work Comp Advisor is equipped “to help frustrated employers take back control of their Workers’ Comp Insurance.” (Institute of Work Comp Professionals)

The most successful work comp programs implement a strategy to eliminate or reduce work comp claims. This kind of program applies practices like:

  • Instituting a proven and vetted physicians panel
  • Establishing return to work programs for injured employees
  • Creating an effective safety panel to address safety issues proactively
  • Conducting worksite safety reviews
  • Implementing a strong claims management program – coordination and communication provided by an unbiased 3rd party are vital to building trust and improving claim outcomes.
  • Addressing HR issues that may lead to future work comp claims


A CWCA will partner with your organization to adopt these kinds of best practices depending on your needs. A CWCA will examine your current work program and draft a plan to help you take control of your work comp costs.

The Work Comp Team at Baily Insurance

Baily Insurance is passionate about work comp – about helping businesses create a culture of safety, better care for their employees, and reduce their work comp expenses.

Each member of our team is a Certified Work Comp Advisor

Our agency specializes in working with:

  • Excavators
  • Trade Contractors
  • Manufacturers
  • Trucking companies
  • Oil and gas
  • Municipalities
  • Schools
  • Non-profits
  • Human Services


If your work comp costs are consistently rising, our team can help you address the underlying factors impacting your premiums. Starting with a brief 15-minute conversation, we can quickly assess if our team would be a good fit for working with you.

By filling out the form below, you can let us know a little more about your work comp issues. Within one business day, someone from our team will reach out to you. 

I am looking forward to connecting and helping you take control of your work comp program.


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