The Case: Travelers v. Universal Drywall, LLC
Why we are featuring it:
In this case, Travelers sought to collect $327,356 in additional premium under a workers compensation insurance contract it had with Universal Drywall. The additional premium was based upon the exposure created by more than 100 individuals who Universal characterized as “independent contractors.” All of the individuals were paid by Universal to perform Universal’s drywall subcontracts on large construction projects in Massachusetts.
What agents should know:
Insureds who intend to use “subcontractors” or “independent contractors” to do their work, especially in the construction industry, should realize that even where the “contractor” signs a contract as to his or her independence, and both parties consider the contractor to be independent, the facts and circumstances of the relationship (i.e., how the relationship works in practice as opposed to how the parties document it) may still lead to the individual being deemed an employee for purposes of workers compensation liability as well as other purposes, such as wage and overtime liability.
What the Court said:
On October 19, 2011, the Court entered judgment in favor of Travelers in the amount of $327,356, having found that the individuals were employees for purposes of the workers compensation law. The court allowed Travelers’ motions to add costs and interest to the judgment, and denied Universal’s motion to alter or amend the judgment. Universal filed a notice of appeal. With interest, the judgment is now worth in excess of $480,000.
Agent Takeaways:
- An independent contractor relationship, particularly in the construction industry, is not created simply because the parties agree that that is the relationship.
- A true assessment of the nature of the relationship requires an evaluation of all of the circumstances of the contract of hire and the day-to-day activities of the parties.
- The failure to adequately account for workers compensation exposure created by purported “independent contractors” can result in significant unwanted surprises when the policy is audited and the true premium calculated.
Garrett Harris represents corporations and individuals in complex business and insurance litigation involving everything from ERISA, unfair business practices and the consumer protection act to construction contract, commercial litigation, workers compensation, and complex insurance premium accounting and collection cases. In addition, Mr. Harris is also well-versed in creditor litigation involving the U.S. Bankruptcy Court. He has tried more than twenty jury and non-jury cases in the state, federal, and bankruptcy courts in Massachusetts, and has briefed and argued appeals before the United States Court of Appeals for the First Circuit, the Massachusetts Appeals Court and the Massachusetts Supreme Judicial Court. He has represented insurers in more than one hundred proceedings in labor departments, insurance departments, and other administrative agencies in Massachusetts and New Hampshire.
