Workers Comp Insurance in Florida

As you probably already know, all Florida contractors by law are required to have Work Comp.  The main way contractors get around this requirement is by becoming a corporation – which by the way is a good idea for many reasons.  Once you are a corporation, up to three officers can “elect” to be exempt from workers compensation.  This is why most small one man operations do not have comp and instead have an exemption certificate.

Exempt status can be great – but it can also be very VERY bad!

Being exempt may seem like a great deal, but here is where it can be a VERY bad one: Although the law allows you to be exempt from purchasing Work Comp, it does not exempt you from your liability under the State Work Comp Statute. Florida work comp statutes declare Workers Comp as the “Sole Remedy” for an injured employee. That means if your employee gets hurt, he may sue the work comp insurance company (and many do), but it is very difficult if not impossible for him to sue the employer.

If you are a contractor who is exempt, and therefore DO NOT have a work comp policy, it is entirely possible that some “buddy” who is working for you may get hurt, and can then sue your business and in some cases you personally. When you have comp he can only sue the insurance company because by law, that is your injured employees “Sole Remedy.” This is also why GC’s are having a hard time getting comp…

As a General Contractor in the State of Florida, you are held ultimately responsible for your subs who are injured on your job-site. That means that even if your subcontractor lies about having comp (and many do) and becomes injured, your Work Comp policy is then expected to step in and pay the injured employees bills. If you, as the GC is exempt, then you may find yourself liable for some subs injury, and worse would most likely not have any protection under the statues because of that “Sole Remedy” thing we mentioned before.

An owner/GC/large project REQUIRES you to get comp – now what?

Some of you are discovering that as a GC, you may WANT work comp but nobody will sell it to you. That can be extremely frustrating since the law obviously requires you to purchase the product – why then is it not available? The reason why is that most “paper” GC’s subcontract most if not all of their work. This means that the premium for you as a “supervisor” is actually very low. HOWEVER all it takes is one hung-over roofer to fall and you may have a $500,000 claim on your hands. The insurance companies do not want to only collect $2000 from you the GC only to have a $500,000 claim on their hands. That’s also why roofers pay so much more in Work Comp – hang-overs and all!

What if you are REALLY careful and make sure ALL your subs have work comp?

Even so, it is safe to say that many (let’s be honest here) of your subs DO NOT have Work Comp. That means the insurance company does not want to take the chance that one of your subs “forgets” to pay their premium, has an accident, is therefore uninsured, and you as the GC are held accountable as the statutory employer. You can also verify a subs Work Comp coverage here.

So if you really do want Work Comp as a GC, what options do you have?

You basically have three options:

  1. Make yourself “attractive” to a work comp insurance company so that they write you a policy – this means that if you have 10 guys who are “subcontractors” that you use all the time. Go ahead and make them employees. By self-performing your work, you will actually pay more in work comp premium, but this is exactly why you become more attractive to an insurance company. Even if you had your own Work Comp policy, you would probably get stuck with their premium when you are audited by the carrier.
  2. You can buy your work comp insurance through the State of Florida through a program known as the JUA – This is an “expensive” option and a slow one too. Even so it may be cheaper than #1 above, but it involves filling out TONS of forms and collecting lots of documents. After all, the program is run by the State of Florida!
  3. Purchase Work Comp through a leasing company – In this case you are actually buying Work Comp through another company where you are essentially “bundled” together with other companies. Although this makes getting the comp fairly easy – you still do not have your own Work Comp. The Work Comp policy is in the Leasing company’s name and not yours. This also removes the “sole remedy” protection you may be expecting as well. If you are a pure “paper GC” this is NOT a good option if you are looking to protect yourself from work comp liability.

What if I turn all my employees into subcontractors or 1099’s?

This sounds great at first, but you may find yourself in a bind with the IRS. They get REALLY grumpy when you work around payroll taxes. Also be warned that if you have work comp, the insurance company will conduct a fairly simple audit to determine if you owe them any extra premium. If you show that you have 20 subcontractors, but none of them are exempt or have their own work comp, you may get stuck paying the premium anyways.

What if your work slows down? What about those expensive work comp premiums?

DO NOT simply stop paying your premiums! The best thing to do is to communicate with your agent if you are seeing a major slow-down in work. Work Comp premium is based up your payroll. In theory, if you have $0.00 payroll then your premium should be $0.00. Adjustments can be made for legitimate changes in your business situation. Pay-as-you-go options are popular because they avoid premium over-payments by essentially “hooking up” your Work Comp directly to you payroll company. That way your premium is automatically adjusted as your payroll fluctuates.