Insurance glossary · Workers’ comp and audits
uninsured subcontractor charge.
An uninsured subcontractor charge is premium an auditor adds when you paid a sub who didn’t have their own workers’ comp or liability certificate on file.
Why would my audit charge me for a subcontractor’s work?
Because if a sub doesn’t carry their own insurance, your policy can end up paying for their claims. On workers’ comp, an injured worker of an uninsured sub can often claim against the contractor above them. Insurers charge for that exposure at audit by treating the sub’s pay as your payroll.
How is the charge calculated?
Usually the auditor takes what you paid the uninsured sub, treats some or all of it as payroll in the class code for the work they did, and applies your rate. For general liability, payments to uninsured subs are often rated at a higher rate than insured ones.
How do I avoid an uninsured subcontractor charge?
Collect a current certificate of insurance from every sub before you pay them, showing workers’ comp and general liability in force for the dates they worked, and keep it with your payment records. An expired certificate can count the same as none.
Does a ghost policy certificate count?
Generally, a valid workers’ comp certificate shows the sub had a policy, which is what the auditor checks. Whether it protects you for the sub’s owner depends on the state, which the ghost policy page covers.
What if a sub had insurance but I didn’t collect the certificate?
Get it now. Many insurers will remove the charge if you provide certificates showing coverage was in force when the work was done, even after the audit.
Does this apply to 1099 workers?
Yes. A worker paid on a 1099 without their own coverage is often treated as your employee for workers’ comp and as an uninsured sub for general liability, depending on the state’s rules and how the work was controlled.
Does the uninsured subcontractor charge work differently by state?
Yes, for workers’ comp. Each state’s rating rules and its law on whether a contractor is liable for an uninsured sub’s workers shape the charge. The notes below cover Riza’s licensed states.
in the states where Riza is licensed.
Riza is a licensed insurance agency in New York, Colorado, Texas, Florida, Massachusetts, Arizona, Nevada, North Carolina, New Jersey and Georgia. Notes below cite the law they come from. Detailed write-ups cover Arizona, Nevada, Texas, North Carolina and New York. One-line notes for other licensed states appear with them when this term has one.
- ArizonaArizona follows the national rule: no certificate for a sub means premium on the sub’s payroll or a set share of the contract price. Arizona adds two ways out. A written independent contractor agreement meeting the statute generally bars premium on those payments, and a sole proprietor waiver relieves the hiring business of coverage and premium for that person.A.R.S. § 23-902 · A.R.S. § 23-961contractors in Arizona →
- NevadaNevada treats subcontractors and their workers as the principal contractor’s employees unless they carry their own coverage, so uninsured subs’ pay lands on the general contractor’s audit. Licensed one-person subs are counted at a fixed monthly wage, and a general contractor can ask the insurer for a final certificate that ends premium for a finished project.NRS ch. 616A (616A.210) · NRS ch. 616B (616B.645)contractors in Nevada →
- TexasBecause workers’ comp is optional for most private Texas employers and there’s no general rule making a contractor liable for a sub’s workers on private jobs, the charge applies mainly where the insurer could be liable, for example under a written agreement to cover the sub. The Texas policy then lets the insurer use the contract price when there are no payroll records.TDI, Texas workers’ comp manual · Tex. Lab. Code § 406.123contractors in Texas →
- North CarolinaNorth Carolina requires a certificate of insurance for each sub. Without one, the auditor charges the sub’s payroll or, if there are no records, a set share of the subcontract price by type of work, and applies your experience mod. That mirrors the state law making a contractor that sublets without a certificate liable for the sub’s injured workers.NCRB Basic Manual, Rule 2-H · N.C.G.S. § 97-19contractors in North Carolina →
- New YorkNew York makes a contractor liable for an uninsured sub’s employees, and its rating manual charges premium on the sub’s entire payroll for the work, or a set share of the subcontract price if there are no records. Owners who excluded themselves on their own policy are picked up on the hiring company’s policy when they do its work.NYCIRB manual, Rule VIII · N.Y. Workers’ Comp. Law § 56contractors in New York →
by trade.
- General contractorsUninsured subs are the most common source of audit bills for GCs, and the fix is paperwork collected before each payment.
- PlumbingHelpers paid on a 1099 and small subs for excavation or drain work are where charges usually come from.
- RoofingRoofing crews are often subcontracted, and roofing class codes carry high rates, so missing certificates are expensive.
- Landscaping and property vendorsSeasonal helpers and tree subs without their own coverage commonly show up at audit.
where you’ll see it.
- Audit statementA line for “uninsured subcontractors” added to payroll in a class code.
- Audit requestsA request for a list of subcontractors, amounts paid and their certificates.
- Policy wordingA condition that premium may be charged for subcontractors without evidence of insurance.
certificates in before the check goes out.
Riza helps you set up a simple certificate check for every sub, reviews your subcontractor list before the audit, and works with the insurer to remove charges when coverage existed.
Get a quoterelated terms.
Coverage it touches: Workers’ comp · General liability