Statutory Employer Defense Found for Subcontractor Notwithstanding Lack of Workers' Compensation Insurance

Last month the Virginia Supreme Court ruled in David White Crane Service v. Howell, 282 Va. ___ 1000981, ___ S.E.2d ___ (2011) that a subcontractor's lack of workers' compensation insurance did not affect the subcontractor's ability to rely upon Virginia's statutory employer defense as a bar to the claim of an employee of the general contractor who claimed he was injured by the subcontractor's employee. The lower court had held that the subcontractor's failure to obtain workers' compensation insurance precluded the subcontractor from relying upon the statutory employer defense, but the Supreme Court disagreed for a number of reasons as explained in the decision, holding that the subcontractor nevertheless came under the broad canopy of Virginia's statutory employer act. While a "good news" decision for subcontractors and their insurance carriers, subcontractors should not use it as a means of avoiding their statutory insurance obligations or the practical reasons of obtaining workers' compensation insurance; all of which has separate adverse consequences.