The South Carolina Supreme Court in a recent opinion found that each time a general contractor enters into a subcontract agreement, it must verify that the subcontractor has insurance if it is to escape potential liability under workers compensation laws for subcontractor injuries. This rule applies regardless of when the general contractor checked for insurance on a previous project.
This case involved an injured employee of a subcontractor. At the time of the injury, the subcontractor’s insurance had been cancelled. The general contractor was a statutory employer and according to SC law, may be held liable for work-related injury to employees hired by a subcontractor. Thus, the general contractor sought to transfer liability to the South Carolina Uninsured Employers Fund under section 42-1-415 of the South Carolina Code. However, the statute states that in order to shift liability, the contractor must “obtain[] adequate proof that the subcontractor had insurance coverage at the time the subcontractor ‘was engaged to perform work.’”
The general contractor argued that because it checked for insurance at the beginning of the year, it could shift its liability. On the other hand, the injured employee and the SC Uninsured Employers Fund argued that since the general contractor did not check for insurance prior to the specific job he was injured on, it could not shift liability. The Supreme Court held that “‘engaged to perform work’ means each time a subcontractor is actually hired to perform work. Thus, if a contractor enters into a contract to hire a subcontractor for one job in January and then enters into another contract to hire the subcontractor for a second job in February, the contractor should verify that the subcontractor still has insurance coverage at the time of the February hiring.”
This opinion teaches general contractors that each time they enter into a new subcontract agreement for a new project with a subcontractor, they must verify that the subcontractor has insurance. If the general contractor does not do this, it will lose the ability to shift liability for subcontractor injuries where the subcontractor does not have insurance.
Hardee v. McDowell and S.E. Smith Construction Co. and South Carolina Uninsured Employers’ Fund., Opinion No. 26605 (S.C. Feb. 23, 2009)
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