SDV Insights

An Introduction to Workers' Compensation Insurance for Construction Companies and Contractors

Workers’ compensation insurance is one of the most important coverages for construction companies and contractors. A workers’ compensation policy typically provides insurance for accidents on-site or in the workplace, and other injuries sustained while working. This coverage includes medical expenses, lost wages, worker death, and related costs. Although independent contractors might not be required to carry workers’ compensation insurance, they should also obtain this coverage if they have any employees. In some states, construction companies who employ independent contractors could also be required to provide workers’ compensation coverage to them.  

Workers’ compensation insurance policies usually afford compensation and healthcare benefits to employees who become sick or injured because of workplace accidents or exposure to harmful elements. While the employee’s injury or illness is not required to occur in the employee’s workplace, it must be related to their work. Covered employees include all full-time, part-time, and seasonal employees of the insured business. However, the coverage typically does not include the owners of the business or any independent contractors. In some cases, independent contractors could be contractually required to provide insurance coverage to uninsured or underinsured subcontractors in order to be compliant with the requirements of a project.

A workers’ compensation policy typically has three parts of related coverages which address risks for employers. These include Parts A, B, and C. Part A of the policy covers injured employees for workplace injuries. There are no limits of insurance on this part of a workers’ compensation insurance policy. In addition, under the benefits provided by Part A of the policy, both the employee and their survivors are eligible for benefits under the policy coverage. These benefits are usually provided to the injured employee on a no-fault basis if the employee is not under the influence of alcohol or drugs. Additionally, many workers’ compensation policy forms provide partial reimbursement of lost wages and survivor benefits if an employee is killed in a workplace incident. It is also important to note that Part A of a workers’ compensation policy typically meets state requirements for insurance coverage.

Since Part A of the coverage in the workers’ compensation policy has no limits on the policy form, the insurance carrier will pay all benefits required by the workers’ compensation regulations of the state which are listed in the declarations of the policy. If the payments made by the insurance carrier exceed the benefits required to be provided under the state’s workers’ compensation regulations, the insurance carrier could attempt to recover from the insured employer. If employers have had a high number of claims, or if the claims have been especially severe, they are likely to be compared to other similar companies in their industry and are also likely to pay higher premiums for their workers’ compensation insurance coverage.

Further, Part B of a workers’ compensation policy covers additional costs which are related to four types of employee claims – third-party lawsuits, loss of consortium lawsuits, consequential bodily injury damages or disability, and dual capacity lawsuits. Part B of the policy is typically known as employers’ liability coverage. While Part A addresses state insurance requirements, Part B of the policy covers additional claims which go beyond the coverage provided by Part A of the workers’ compensation policy.

In addition, Part C identifies the states where the workers’ compensation coverage benefits will apply. This part of the policy has two subsections. The subsections include a section which lists all states where workers’ compensation coverage is required, and another section which names the remainder of the states in which benefits will be paid by the policy. If a construction company or a contractor is considering an expansion of their business into different states, it is important to have an attorney review their policy and ensure that all the states where the business operates, or where their employees could reside, are covered under its workers’ compensation policy.

Business owners and contractors should consult an experienced attorney to determine if they have any gaps in their workers’ compensation coverage and to make sure that their businesses are appropriately covered. Moreover, business owners and contractors should ensure that they have the appropriate coverages under all parts of their workers’ compensation insurance policies. For a review of your workers’ compensation policy and additional information about workers’ compensation coverage, please contact one of SDV’s attorneys at


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