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Court
Opinion Highlights Risk Involved in Common
Independent Contracting Arrangements -
Critical for Farmers
Getting
work done by independent contractors is very
common, especially for those in the agricultural
industry. Whether one is contracting for a
small job like painting a barn, or a larger job
like building a tool shed or grain storage bin, it
is important to understand the liability risks
involved with those very common contractual
relationships.
In a
recent case, the Indiana Court of Appeals
highlighted the risk that individuals face in
their professional and private lives when
contracting for jobs valued at more than
$1,000. The Court of Appeals found that the
Indiana Worker's Compensation Act places liability
on the person who lets such a contract (the
"statutory employer") under certain
circumstances.
The Act
states that when the statutory employer - a
farmer, for example - hires someone to do a job
valued at more than $1,000 the statutory employer
will have to pay the worker's compensation
benefits if (1) there is an injury to the
contractor's employee; (2) the contractor does not
have worker's compensation insurance; and (3) the
person contracting for work to be done has not
obtained a certificate on the contractor from the
Indiana Workers' Compensation Board. This is
commonly called the "statutory employer's
liability."
In the
case, a farmer hired a contractor to paint a house
and barn. Although the legislation exempts
work done on one's personal residence only, this
job involved the house and barn, so the exemption
does not apply. The farmer did not obtain a
certificate from the Indiana Worker's Compensation
Board showing that the contractor had worker's
compensation insurance. An employee of the
contractor was injured on the job and the
contractor did not have worker's compensation
insurance. The employee demanded worker's
compensation benefits from the farmer. The
farmer sought coverage under his personal
liability policy, but that policy excluded
benefits that are required to be paid under
worker's compensation law. The insurance
company successfully argued that the exclusion, a
common exclusion in liability policies including
most homeowner's and business liability policies,
precluded any coverage to the farmer for the
injured person's worker's compensation
benefits. Therefore, the court held the
liability insurance policy did not provide
coverage for the farmer for any amount he had to
pay to the injured worker.
Therefore,
to avoid personal and business risk, one must
obtain a certificate from the Worker's
Compensation Board showing that the contractor has
worker's compensation insurance. A
certificate signed by an insurance agent will not
be sufficient to mitigate liability in the event
that an injury occurs and the contractor does not
have worker's compensation insurance. Also,
if you have worker's compensation insurance for
your operation, you should check whether that
policy may provide coverage for this
situation. Finally, see if you can get
contingent worker's compensation coverage on your
farm's liability policy.
This
publication is intended for general information
purposes only and does not and is not intended to
constitute legal advice. The reader must consult
with legal counsel to determine how laws or
decisions discussed herein apply to the reader's
specific
circumstances. | 
