A contractor fails to pay workers' compensation premiums and coverage lapses. An employee is injured the next day. What is the contractor's liability?
Correct Answer
C) Full personal liability for all costs
When workers' compensation coverage lapses, the contractor becomes personally liable for all injury-related costs without limits.
Why This Is the Correct Answer
Under Georgia law, when a contractor's workers' compensation insurance lapses, the contractor loses the protection of the workers' compensation system and becomes personally liable for all injury-related costs. This includes unlimited liability for medical expenses, lost wages, disability benefits, and any other damages resulting from workplace injuries. The contractor cannot claim the limited liability protections that workers' compensation normally provides to employers.
Why the Other Options Are Wrong
Option A: Limited to $50,000 maximum
There is no $50,000 liability cap when workers' compensation coverage lapses. The contractor faces unlimited personal liability for all injury-related costs, which can far exceed any arbitrary monetary limit.
Option B: Liability limited to medical costs only
Liability extends far beyond just medical costs. The contractor is responsible for lost wages, disability benefits, rehabilitation costs, and potentially pain and suffering damages - not just immediate medical expenses.
Option D: No liability - employee must sue insurance company
The employee cannot sue the insurance company when coverage has lapsed because there is no valid policy in effect. The contractor, not the insurer, bears full responsibility for the injury costs.
Memory Technique
Remember 'Lapse = Lose Protection' - when workers' comp lapses, the contractor loses all liability protections and faces unlimited personal exposure.
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