Contractor's carrier on hook for subcontracting employee's injuries

In Utah, a subcontractor's employee may be considered an employee of a contractor -- obligating the contractor's insurance carrier to pay workers' compensation benefits -- when the contractor procures the subcontractor's services, has supervision or control over the work performed, and is in the same trade or business that the contractor performs.

Case name: Workers' Compensation Fund and Iverson Steel and Erection Co. v. Wadman Corp. v. State of Utah Dept. of Admin. Services, et al., Nos. 20070160 and 20070180 (Utah 03/24/09).

Ruling: The Utah Supreme Court reversed and remanded the District Court's judgment, finding the worker was an employee of the contractor and therefore the contractor's insurance carrier was responsible for providing insurance coverage to the worker.

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What it means: In Utah, a subcontractor's employee may be considered an employee of a contractor -- obligating the contractor's insurance carrier to pay workers' compensation benefits -- when the contractor procures the subcontractor's services, has supervision or control over the work performed, and is in the same trade or business that the contractor performs.

Summary: An employee of a steel subcontractor was severely injured working on a school construction job. For the project, the school district opted to obtain workers' compensation coverage through an owner-controlled insurance program. As part of its contract with the school district, the general contractor also enrolled in the OCIP. Although it was enrolled and it paid the subcontractor's premium to be covered under the OCIP, the contractor neglected to timely submit the subcontractor's enrollment information, and the OCIP was not issued for the subcontractor until the day after the accident.

The OCIP carrier argued the subcontractor carried its own outside insurance, and thus, it was not obligated to pay.

The Utah Supreme Court nonetheless found that the employee was an employee of the contractor for purposes of the state's workers' compensation law. Thus, the contractor's insurance carrier was obligated to pay.

The court explained that to be considered an employer, the contractor had to procure the work to be done, the contractor had to retain supervision and control, and the work performed had to be part of the contractor's trade or business. The court determined the general contractor met all of the relationship criteria.

The court determined that although the subcontractor carried its own insurance outside of the project, this did not preclude the subcontractor from being an employee for purposes of the school project. The court pointed out that the contractor did not know the subcontractor had other insurance for the project. Moreover, the contractor had requested the subcontractor reduce its bid in anticipation of the OCIP.

The Utah Supreme Court reversed the District Court's decision granting summary judgment for the carrier and remanded the case.

May 11, 2009

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