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The South Carolina Court of Appeals recently published an opinion that clarified when a general contractor can shift liability for worker's compensation benefits to the South Carolina Uninsured Employers' Fund. The facts at issue involved an injured employee of a subcontractor who sought worker's compensation benefits. At the time the general contractor hired the subcontractor, the subcontractor submitted a certificate of insurance to the general contractor. As it turned out, the subcontractor was not insured in South Carolina.
After benefits were denied to the worker, the general contractor sought to transfer liability to the South Carolina Uninsured Employers' Fund. South Carolina Code Section 42-1-415 provides a general contractor a method of shifting liability for worker's compensation benefits to the South Carolina Uninsured Employers' Fund. In order to shift liability, the general contractor must show that the subcontractor provided it with "documentation" that showed the subcontractor had worker's compensation insurance. The Court of Appeals found that the term "documentation" was ambiguous and in order for a general contractor to satisfy the requirements of Section 42-1-415, the documentation submitted by the subcontractor had to show that the subcontractor had worker's compensation insurance in South Carolina. The documentation in this case did not show coverage in South Carolina; thus, the Court held that the requirements of Section 42-1-415 were not satisfied and the general contractor could not shift liability.
The Court held that "a general contractor cannot expect to turn a blind eye to the subcontractor's obvious lack of coverage in South Carolina." A determination of "what type of conduct constitutes an obvious lack of coverage in South Carolina" will be determined on a case-by-case basis. As a practical matter, general contractors need to diligently verify the information on certificates of insurance, especially to insure that the coverage extends to South Carolina.
Timothy Mark Hopper v. Terry Hunt Construction, South Carolina Uninsured Employers' Fund, Kajima USA, Inc. and Zurich American Insurance Company, Opinion No. 4238, South Carolina Court of Appeals (April 23, 2007).
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