Construction Contractors–Workers Compensation Review

In 2007, the State of Delaware signed into law Senate Bill 1 reforming Delaware’s Workers’ Compensation System for the construction industry. I have been sure to contact all clients who are insured through my office and offered explanation to those who requested information. With the new year upon us, I felt it time to remind those affected that your Workers Compensation policy needs to be reviewed. First off, the new law is mandatory. I have reviewed the details with the Department of Labor, the Delaware Insurance Department, the Delaware Compensation Rating Bureau, and Senator Anthony DeLuca’s (sponsored the bill) office.

To simplify the issue, I’d like to provide the following summary:

1)All contractors, subcontractors, partners, sole proprietors, and independent contractors in the construction industry are required to carry Workers Compensation Insurance.

2)Four executive officers of a corporate entity or four members of a limited liability corporation may elect to be exempt from coverage provided the election is in writing.

3)General Contractors (which include any entity hiring a subcontractor) are subject to fines up to $250/day levied by the Delaware Department of Labor.

4)When hiring a subcontractor, the general contractor has four options:

a)Secure an exclusion form from the existing corporation or limited liabilty corporation and keep the form in record for 3 years. (Up to four officers or  partners may be excluded)

b)Obtain a Certificate of Insurance from the subcontractor showing proof of Workers Compenstion Insurance. Be certain to update this certificate annually.

c)Add the subcontractor to your existing Workers Compensation policy. This option will increase your premium.

d)Do not hire the subcontractor.

Sole Proprietors can form a Limited Liability Corporation and exclude themselves.

The full text of this bill can be found at www.legis.state.de.us. Any further clarification can be obtained by calling my office or the Delaware Department of Labor at 302-761-8200.