An employee is injured on a job site. The contractor's workers compensation insurance was cancelled 2 weeks prior due to non-payment. What is the contractor's exposure?
Correct Answer
A) Personal liability for all benefits required by law
When workers compensation insurance lapses, contractors become personally liable for all benefits that would have been covered by insurance, including medical expenses, lost wages, and disability benefits.
Why This Is the Correct Answer
When a contractor's workers compensation policy lapses — for any reason, including non-payment — the contractor steps into the shoes of the insurer. South Carolina law makes the employer personally liable for ALL statutory benefits that the policy would have covered: medical treatment, temporary and permanent disability payments, lost wages, vocational rehabilitation, and death benefits. There is no cap and no reduction because the employee may have contributed to the accident.
Why the Other Options Are Wrong
Option B: Limited to medical expenses only
Limiting exposure to medical expenses only is a common misconception. Workers compensation replaces lost wages and pays disability benefits in addition to medical costs. A contractor without coverage owes the full package of statutory benefits, not just the hospital bill.
Option C: No liability if employee was negligent
Employee negligence is irrelevant under workers compensation. The entire purpose of the workers compensation system is a no-fault exchange: employees give up the right to sue in tort; employers accept strict liability regardless of how the injury occurred.
Option D: Liability limited to $50,000 maximum
There is no $50,000 statutory cap on a contractor's personal liability for workers compensation benefits when coverage has lapsed. Costs can far exceed that figure for serious or permanent injuries.
Memory Technique
Think 'ALL or NOTHING': when coverage is cancelled, the contractor owes ALL the same benefits the policy would have paid — nothing is reduced, nothing is capped, and the employee's fault is nothing to the analysis.
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