Early in my Oregon life, I was the young kid with a new leather nailbelt and tools with no nicks or scratches. Smug with confidence, one day at lunch I drove off the dune where I was repairing rot on a house and headed to town.
At the corner, another crew was adding a basement to an older home. Instead of digging out 8 feet of sand, it seemed a great idea to raise the building four. My neck twisted in a double-take driving past as it looked like only a few posts without braces were holding up the entire house.
Even as green as I was (and I don’t mean environmentally), I thought it looked precarious. I figured the dune in between, which obstructed a portion of the house, must be hiding more substantial support. I continued on my merry way.
On the way back, however, I was amazed to see the house had toppled over, a mass of splintered wood askew grotesquely. The crew, full of adrenaline, were shaking their heads, glad to be alive. I turned right around and ordered some insurance.
It is up to the individual states whether a carpenter needs a license and/or bonding to operate, but every conscientious member of the trade working independently should carry a liability policy.
For the general guy sub-contracting his labor to other companies, it is the first criteria required to establish himself as a legitimate business. A typical policy is for $2 million and costs about $500 to $750 per year, payable in total the first year and in quarters thereafter. Technically, he cannot be paid without providing proof of insurance.
Companies typically will carry larger policies that include the risk of hiring other sub-contractors and have premiums based on a percentage of the gross volume of work. Once a year there is an audit by the company to ensure that any sub paid over $600 in the previous 12 months had, in fact, provided his proof of insurance. Otherwise, he is considered an employee and the company must pay Worker’s Comp on all his hours, a significant penalty if they have paid a few hundred thousand to uninsured subs.
Beyond the legality, it is just good business. The guys in Oregon dropped their belts and walked. With no insurance, they had no means to rebuild the cost of their mistake. In a flash of undersight, they were ruined. The clients were left with a mess—one more bad contractor story that makes it hard for the rest of us.
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