What do we need to know when we hire a handyman or contractor?

If hiring a contractor here are some points to consider:

Secure the services of only an insured contractor or company and ensure that they have the following recommended minimum limits of liability insurance by getting a copy of their Certificate of Insurance (where applicable):

  • General Liability $1,000,000 per occurrence
  • Liquor Liability $1,000,000 per occurrence
  • Automobile Liability $1,000,000 per occurrence
  • Workers’ Compensation $500,000 per accident

The main reason why we recommend that your contractors have their own insurance is so your organizations coverage would not have to respond to a claim that was caused solely by your contractor. The reason why we recommend the above minimum limits is that these are industry standards and should we need to file a claim against the subcontractor for damage or bodily injury they caused, we would want sufficient limits to access or what we refer to as subrogation against a third party.

What are the risk management considerations of hiring members as employees?

We do not support our clients hiring volunteers as employees. The main concern is with workers’ compensation coverage. First, there is a question of whether or not this type of employee would even be eligible for workers’ compensation coverage because of the way workers’ compensation policies are structured. If they do have it, employing members, whether they are residents of the facility or not, broadens the liability of the workers’ compensation coverage. It becomes more difficult, if not impossible, to ascertain whether the injury took place at work or during personal time, which could ultimately make the workers’ compensation coverage a de facto health insurance replacement.

We also have concerns with Employment Practices Liability, including the following complicated questions:

  • Are hours clearly defined?
  • What happens if members are doing work on personal time, either on their own or at the direction of their supervisor?
  • What if they are disciplined either based on not completing job responsibilities OR for violating policies as a member?
  • Does that open the employer (chapter or house corporation) to claims for hostile work environment?

As is evident, this is a complicated exposure. Please contact your Client Executive with further questions.

How do I determine if an individual is an employee or if he/she is an independent contractor?

For purposes of the Workers’ Compensation coverage, the usual definition of an employer is as follows:

  • “Employee is generally defined as a person hired to perform certain services or tasks for particular wages or salary under the control of another (the employer).
  • “A worker hired to perform a specific job usual and customary to the employer’s business operation in exchange for money or other remuneration.”

The main feature of this definition is the amount of control that the employer has over an individual, which then qualifies that person as an employee. Independent contractors are the opposite of being an employee and these individuals or firms are hired to do work that is generally not within the usual trade or business of the employer. An example of this would be the landscaper hired to do your landscape needs or a handyman to clean off snow from your sidewalk.

What is considered compensation that I will need to report to the insurance company as our exposure?

The insurance policy will be issued on your organizations national policy effective date with an estimated compensation for your location. At the conclusion of this policy period, you will be asked to provide MJ Insurance with your actual compensation dollars for your employees.

The compensation number is to include not only the monetary compensation paid to your employees, but also is to include any “in kind” compensation such as room and board allowances, use of a cell phone for the house director and meals for your hashers/house boys as some examples. The total value of both is monetary and “in kind” compensation is what you should report at the policy year end’s audit.

Do you have resources for injured workers?

Yes. The insurance company, Travelers, has developed a web site to answer some of the questions you may have about the workers compensation process. By logging on to, you will tap into an online resource center that:

  • Clearly informs you of your rights and responsibilities in the workers compensation process
  • Provides access to claim status and claim payment information
  • Provides access to the most common state forms needed to expedite the workers compensation process
  • Is available in English and Spanish
  • Provides online support to answer your questions

Do we have to provide workers’ compensation coverage to our employees?

If you have employees, you are required by law to purchase workers’ compensation coverage. Virtually every state requires its employers to buy workers’ compensation insurance coverage for its employees. Should there be no Workers’ Compensation and an employee is injured, the state will levy significant fines and costs to the employer for not meeting their obligation.

In the states of ND, OH, WA and WY, the Workers’ Compensation insurance coverage is purchased through a state agency and these states are referred to as monopolistic states. If your employment exposure is in one of the other states, your organization has secured a national Workers’ Compensation policy of which you have access. Please refer to the Insurance Overview for your chapter/house corporation to determine if your location is covered by the national insurance policy.

Are we allowed to have volunteers work at the chapter house?

We recently had a claim reported whereby the son-in-law of the House Director was injured while doing some “maintenance” type work for the chapter. This type of practice is concerning for two reasons: (1) If you have “volunteers” perform any type of work for you at the chapter house, it is incumbent upon you as the property owner to make certain they understand that it is at their own peril. Thus, if they are injured while performing this work, it is the expectation of your insurance company that any medical expenses will be borne by the individual. In all likelihood, they would need to then turn to their own health insurance provider. (2) Also many states have very rigid expectations of someone performing any type of work on your behalf, and this could elevate them to the status of an employee and subsequently you have both tax and insurance requirements to then deal with.

We certainly understand the convenience and interest of using volunteers to help out at the chapter house; however, it is important that you understand the extent to which this can complicate and ultimately impact your insurance coverage. We urge you to consider hiring out those tasks, which are likely to create a bigger risk to injury to the individual and/or put the property itself at peril. Feel free to contact us with any further questions that may arise on this subject.