A Sub Handed Over a Certificate of Insurance. The Policy Had Lapsed, and the GC’s Own Workers’ Comp Paid the Claim.

6 min read · Last updated July 15, 2026

In this article

– The certificate proved coverage existed one day, not every day – How an uninsured sub’s claim lands on your policy – What one claim does to your experience mod – How to verify coverage stays active – Frequently asked questions

Marcus Bell, a general contractor near Columbus, hired a two-man framing crew and did what his insurance agent told him to do: he collected a certificate of insurance showing the crew carried their own workers’ compensation. Six months later, one of the framers fell off a second-story wall and shattered two vertebrae. The medical and wage claim came to roughly $180,000. When the paperwork went in, Marcus learned the framer’s workers’ comp policy had lapsed for nonpayment three weeks before the fall. His own policy paid the claim, and his premium climbed for the next three years.

The certificate proved coverage existed one day, not every day

A certificate of insurance is a one-page summary an insurance agent issues to confirm a policy is active on that date. That is the whole job it does. It is not the policy, it does not lock coverage in place, and it does not obligate the insurer to tell you if the sub stops paying and the policy cancels next month.

That gap is where general contractors get hurt. The sub hands over a clean COI at signing, the job runs for months, and somewhere in the middle the sub misses a premium payment or cancels the policy to save money. The certificate in your project folder still looks valid. The coverage behind it is gone. When a worker is injured, the claim does not care what your folder says. It follows the coverage that actually exists on the date of the accident.

How an uninsured sub’s claim lands on your policy

In nearly every state, if you hire a subcontractor who does not carry valid workers’ compensation, you generally become responsible for that worker’s injury as if they were your own employee. State workers’ comp systems are built this way on purpose so that an injured worker is never left with no coverage. The Texas Department of Insurance and the California Division of Workers’ Compensation both explain that a hiring employer can be treated as the responsible party when a sub’s coverage is missing.

There are two separate hits. First, the injury claim itself gets paid out of your policy. Second, at your annual premium audit, the insurer reviews payroll for anyone who worked under you without their own valid coverage and adds that payroll to your policy as if they were employees. You pay premium retroactively on labor you never thought was yours to insure.

This is the same failure mode behind two other contractor traps worth understanding: whether a sub is even correctly classified, covered in workers’ comp class code misclassification on construction jobs, and the specialized risk when HVAC and trade subcontractors carry thin or expired coverage.

What one claim does to your experience mod

The premium surcharge is often the part that stings longest. Workers’ comp premiums are adjusted by an experience modification factor, sometimes called an e-mod or EMR. It starts at 1.0, which is the industry-average baseline for your class of work. A history better than average pulls the factor below 1.0 and lowers your premium. A serious claim pushes it above 1.0 and raises your premium for three years, because the rating formula looks at a rolling three-year window. The Insurance Information Institute explains how workers’ compensation premiums are calculated and why a single large loss ripples forward.

Here is what that looks like in dollars for a contractor whose base annual workers’ comp premium is $40,000.

Experience mod	What it means	Annual premium	3-year premium cost
0.85	Better-than-average loss history	$34,000	$102,000
1.00	Industry-average baseline	$40,000	$120,000
1.25	After a serious claim absorbed onto your policy	$50,000	$150,000
Difference	Going from average to post-claim	+$10,000/yr	+$30,000

In this example, absorbing the sub’s claim did not just cost the $180,000 payout that your insurer covered. It also cost an extra $30,000 in premium over three years, plus the retroactive audit premium on the sub’s payroll. A “free” certificate you filed and forgot turned into a five-figure premium problem.

How to verify coverage stays active

The fix is to stop treating the certificate as a one-time gate and start treating coverage as something you monitor. Before the job starts, confirm the policy dates on the COI extend through your entire project, not just the start date. Ask the sub’s agent to list your company as a certificate holder, which means the insurer notifies you if the policy cancels. For longer jobs, require a fresh certificate every renewal cycle and make final payment contingent on current coverage.

Also confirm the coverage type matches the risk. A general liability certificate is not workers’ comp, and being named an additional insured on a sub’s liability policy is a separate protection covered in our guide to the additional insured endorsement for contractors. Watch too for the action-over exclusion that can strip away the additional-insured protection you thought you had.

Frequently asked questions

Does a certificate of insurance guarantee my subcontractor is covered? No. A COI confirms a policy was active on the date the certificate was issued. It does not guarantee the policy is still in force later, and the insurer is not required to tell you if the sub cancels unless you are listed as a certificate holder.

Who pays if my subcontractor’s workers’ comp lapsed and their worker gets hurt? In most states, you do. If the sub has no valid coverage at the time of injury, the hiring contractor’s workers’ comp policy generally becomes responsible for the claim, and the sub’s payroll gets added to your policy at your annual audit.

How long does a workers’ comp claim affect my premium? Typically three years. The experience modification factor uses a rolling three-year window, so a serious claim raises your mod, and therefore your premium, across three policy periods before it drops out of the calculation.

What is an experience modification factor? It is a multiplier applied to your workers’ comp premium based on your loss history compared with other businesses in your class. A 1.0 is average. Below 1.0 lowers your premium, above 1.0 raises it.

How can I make sure a sub’s coverage stays active during a long job? Ask to be listed as a certificate holder so you receive cancellation notices, require a new certificate at each policy renewal, and tie final payment to proof of current coverage on the completion date.