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Maverick, Lawyer
Category: Employment Law
Satisfied Customers: 6422
Experience:  20 years professional experience
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I need help with an insurance audit. I have used an

Customer Question

I need help with an insurance audit. I have used an uninsured subcontractor mistakenly thinking they were not required to have insurance because of the nature of the work. (Janitorial.) I have not yet 1099 the sub contractor because it was earlier this year, no tax year has passed by yet. My insurance company just contacted me for an insurance audit and they want proof of insurance from anyone who has worked for me. How should I proceed?
Submitted: 1 year ago.
Category: Employment Law
Expert:  socrateaser replied 1 year ago.


In which state jurisdiction do you operate?

Customer: replied 1 year ago.
Kittitas county, Washinton
Expert:  socrateaser replied 1 year ago.

I think you may be better served with an attorney from Washington State. I will reopen the question for others to consider assisting you further.

Thanks again for using Justanswer!

Expert:  Maverick replied 1 year ago.

Welcome to Just Answer (“JA”)! My name is Maverick.

Please note: (1) If you want legal advice, you must consult with a local attorney in person before acting or deciding not to act based on any information given here; and (2) I answer most questions within the hour. However, if I am not signed on, please allow up to 24 hours. By continuing, you confirm that you understand and agree to these terms and JA’s site disclaimers presented to you earlier.


It seems to me that you really have nothing to hide or be concerned about here because of the nature of your relationship with this contractor and the type of work for which you hired them. If the sub is uninsured, then the sub may have some problems; but it appears to me that you are not responsible for its potential failure to comply with the laws.


Customer: replied 1 year ago.
Maverick. Thanks for your reply.
Can it not come back on me that I did not get a certificate of insurance before hiring the sub contractor? I believe the insurance company can back charge me for their "exposure" and I can be left with some heavy fee's. I appreciate your insight!
Expert:  Maverick replied 1 year ago.

If you are in the construction trades, you cannot be held liable for a subcontractor’s premiums if you can show that all six of the following statements are true:

1. Both you and your subcontractor are either: Registered contractors under RCW 18.27

2. The work you have subcontracted is the work of a contractor as described in RCW 18.27.010 (work that involves construction, repair, addition or removal, improvement, movement, wrecking or demolition of another’s real property)

3. Your subcontractor maintains a set of books and records that reflects all of the business’s income and expenses.

4. Your subcontractor works out of either a storefront location or home office that is used regularly and exclusively for the business, including paperwork, and is eligible for an IRS business deduction.

5. You are not supervising your subcontractor or his/her employees. This means you are hiring a truly independent contractor, which means you are not: Telling them how to do the job; Assigning tasks; Training; Keeping time sheets; Paying a wage; Setting regular hours.


6. Your subcontractor has an industrial insurance (workers’ compensation) account in good standing with L&I or is a self-insured employer certified by L&I. To help protect yourself from liability, check your subcontractor’s liability certificate (Certificate of Coverage) each year at this site, print a copy of it and keep it on file. It appears that you may have some exposure here if this was not done.

I apologize for my earlier comment; I was thinking that you had just hired a janitor to clean your facility and that he should be exempt under RCW 51.08.180; but it appears that you still have a duty to verify the insurance under Publication F262-262-000.

My thought is that it would be best to be honest about what has transpired during the audit.

Customer: replied 1 year ago.
Maverick:Ok, thanks, ***** ***** of those 6 statements are true. I have a cleaning business and a construction company as well, and have a contractors license. I have lots of insurance because I offer many services. But I needed some help with basic cleaning labor (cleaning bathrooms and vacuuming etc.) so I subcontracted the labor out, she was licensed, but did not have insurance. I was of the understanding that insurance was not required for house cleaners, but was mistaken. I was thinking of a bond maybe?
The audit period is from april 2015 to April 2016, the uninsured has done work for me from January till now, twice a month. I have not 1099'd her as of yet. I still need to report her as a subcontractor to the auditor though, correct?
Expert:  Maverick replied 1 year ago.

While I see a potential way out for both of you, I cannot ethically recommend it as it involves deception and is potentially very risky. I would just say be honest during the audit and chalk it up to experience.

Customer: replied 1 year ago.
Yeah. I know, I could get out of it underhandedly but I don't want to do that unethically either. I have had more overhead in experience than anything else.
Expert:  Maverick replied 1 year ago.

Maybe we could help you reduce that in the future. You can come here for quick, cost affordable guidance in advance next time.