Subcontractor has no insurance — and you just found out. Take a breath. This happens more often than you think, especially on smaller jobs. The good news: you can fix this before it becomes a lawsuit or a six-figure audit surprise. However, you need to act fast. In most states, the law says you are on the hook for that sub’s workers the moment they step on your jobsite uninsured.
Where You Stand: Subcontractor Has No Insurance
Here is the core problem. When a subcontractor has no insurance and one of their workers gets hurt on your job, your state almost certainly treats you as the “statutory employer.” That means the injured worker files a claim against your policy. You pay the deductible. Your experience mod goes up. Your premiums climb for years.
Even if nobody gets hurt, your workers comp insurer audits your payroll annually. If they find an uninsured sub on your books, they add that sub’s payroll to yours and charge you the premium. For example, a roofer sub with $80,000 in payroll could add $8,000 to $24,000 to your annual premium depending on your state.
The rules vary by state, but the pattern is the same almost everywhere. Texas is the only state where workers comp is voluntary for private employers. In every other state, the threshold is typically one employee in construction.
| State | WC Mandatory? | Construction Threshold | GC Liable for Uninsured Sub? | Penalty for Noncompliance |
|---|---|---|---|---|
| California | Yes | 1 employee | Yes — Labor Code 3700 | Up to $100,000 fine + misdemeanor (up to 1 year jail) |
| New York | Yes | 1 employee | Yes — WCL Section 52 | $2,000 per 10-day period; felony if 5+ employees |
| Florida | Yes | 1 employee in construction | Yes — FL Statute 440 | $1,000/day first 10 days, then $5,000/day; stop-work order |
| Illinois | Yes | 1 employee | Yes — 820 ILCS 305 | $500–$10,000 fine; Class A misdemeanor per day |
| Pennsylvania | Yes | 1 employee | Yes — Act 72 | $2,500 fine + up to 1 year jail per day of violation |
| Texas | No (voluntary) | N/A | Possible under reclassification | Loses all common-law defenses if sued |
What to Do First (Step by Step)
Step 1: Stop work with that subcontractor today. Do not wait until the job wraps up. Every day a subcontractor has no insurance on your site is a day you carry uncovered risk. Tell them in writing — email or text — that work is paused until they provide a valid certificate of insurance showing workers comp and general liability.
Step 2: Check your own policies. Call your insurance agent and tell them you discovered a subcontractor has no insurance on a current job. Ask two things: Does your CGL policy cover injuries caused by uninsured subs? Will your workers comp insurer charge you for that sub’s payroll at audit? In most cases, the answer to both is yes. Your CGL may have an “employers liability exclusion” that creates a gap when you become the statutory employer of an uninsured sub’s workers.
Step 3: Get a certificate of insurance — and verify it. A certificate of insurance (COI) is just a snapshot. It does not guarantee the policy is still active. Ask the sub’s insurer directly to confirm coverage. Require the sub to name you as an additional insured using ISO forms CG 2010 (ongoing operations) and CG 2037 (completed operations). If the sub cannot or will not get insured, replace them.
What It Will Cost and What to Watch For
When a subcontractor has no insurance, the cost hits you at audit time. Your workers comp carrier will add the uninsured sub’s payroll to yours and charge you the class code rate for their trade. Those rates vary wildly by trade and state. As a result, the same $100,000 in sub payroll could cost you anywhere from $2,740 to $30,000 in added premium.
| Trade | NCCI Code | FL Rate per $100 Payroll | NC Rate per $100 Payroll |
|---|---|---|---|
| Plumbing | 5183 | $2.74 | $7.50 |
| Electrical Wiring | 5190 | $2.97 | $5.50 |
| Painting | 5474 | $4.48 | $9.50 |
| Carpentry / Framing | 5645 | $7.69 | $12.00 |
| Roofing | 5551 | $9.90–$15.25 | $21.04 (national ref.) |
The bigger risk is a claim. If a subcontractor has no insurance and their worker falls off a ladder on your site, you face the medical bills, lost wages, and a hit to your experience modification rate. That mod increase can raise your premiums for three years. Typically, a single serious claim can push your mod from 1.0 to 1.3 or higher — a 30% premium increase across the board.
Watch for these common traps. Some subs show you an expired COI hoping you will not check the dates. Others carry a policy but cancel it right after handing you the certificate. A few states, like North Carolina, protect you from statutory employer liability if you collected a valid COI before the work started — but only if that certificate was genuine at the time. Always verify directly with the carrier.
When to Call Your Agent or an Attorney
Call your insurance agent the moment you learn a subcontractor has no insurance. Your agent can check whether your current policies have gaps — particularly the employers liability exclusion on your CGL and whether your workers comp policy needs an endorsement for subcontractor operations. Many agents can also help you find short-term coverage solutions while you sort out the sub situation.
Call an attorney if any of these apply: a worker has already been injured, you have received a stop-work order, or you are facing a state investigation. In states like New York and California, penalties for using uninsured subs can include criminal charges. For example, a second offense in California carries up to one year in jail and a minimum $50,000 fine. An attorney who handles construction law or workers comp defense can protect you from the worst outcomes.
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To find help, contact your state’s contractor licensing board or department of insurance. The SBA’s local assistance page can connect you with free or low-cost business advisors. Your state workers compensation board — typically a .gov website — will list the exact requirements for your trade and location. Confirm exact requirements and prices with a licensed insurance agent and your state before making any coverage decisions.
Frequently Asked Questions
Can I just add the uninsured sub to my own workers comp policy?
In most cases, no — not voluntarily. Your insurer may allow it, but they will charge you the full class code rate on that sub’s payroll. However, this is essentially what happens automatically at audit if a subcontractor has no insurance. It is almost always cheaper for the sub to carry their own policy. Ask your agent about the options available in your state.
What if I’m in Texas where workers comp is optional?
Texas is unique. Private employers can opt out of workers comp. However, if you do and a subcontractor has no insurance, you lose your common-law defenses — contributory negligence, assumption of risk, and the fellow-servant rule. That means an injured worker can sue you in civil court with almost no barriers. Many Texas contractors carry workers comp voluntarily for this reason.
Does my general liability policy cover me if an uninsured sub causes property damage or injury to a third party?
It depends on your policy language. Standard CGL policies contain an employers liability exclusion that may deny coverage when you become the statutory employer of an uninsured sub’s workers. As a result, your CGL is not a reliable backstop when a subcontractor has no insurance. You may need a separate endorsement or umbrella coverage. Confirm with your agent what your specific policy covers.
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Sources & How to Verify
The information on this page is drawn from official government and industry sources. Insurance requirements, premiums, and state rules change, so always confirm the exact figure with your state, a licensed agent, or the authority source.
- U.S. Small Business Administration: sba.gov — federal small-business insurance guidance
- Insurance Information Institute: iii.org — neutral premium and coverage data
- NAIC: naic.org — state insurance regulation data
- U.S. Department of Labor: dol.gov — workers’ compensation overview
- Your state DOI, workers’ comp board, and contractor-licensing board: search “[your state] department of insurance” or “[your state] workers comp” for the exact law and forms
Content last reviewed June 2026. If you notice outdated information, please contact us.
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Informational only — not insurance, legal, or tax advice. Business Insure Guide is an independent educational resource, not an insurance company, broker, law firm, or tax advisor, and this page does not provide insurance, legal, or tax advice. Requirements, premiums, and rules vary by trade, state, and insurer, and change over time. Always confirm the exact coverage, requirement, and price with a licensed insurance agent and your state before you buy. Verify with a licensed professional for advice about your specific situation.