Montana was one of the first states to enact legislation relating to the needs of injured workers. The State Accident Insurance and Total Permanent Disability Fund was enacted in 1909, for coal miners. Workers' Compensation laws, later adopted by all states between 1911 and 1940, were designed to provide medical care and income to workers injured on the job, benefits to families of employees killed on the job, and to protect employers from costly and unpredictable lawsuits by workers. Those original legislated laws have been litigated and changed many times over the years and will continue to be as circumstances and conditions change.

Over the recent few years weather related damages to property in Billings has brought insurance consumers up close and personal with damage repair contractors. The most recent storms resulted in numerous roof and siding damages. While there probably will always be controversy between insurers and contractors, some things are fairly spelled out by Montana law.

What is an "independent contractor"? Black's Law dictionary defines "independent contractor" as "a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking".(emphasis mine). 39-71-120, MCA: "An independent contractor is one who renders service in the course of an occupation and: has been and will continue to be free from control or direction over the performance of the services, both under the contract and in fact; and is engaged in an independently established trade, occupation, profession, or business."(emphasis mine).

Montana code provides that anyone desiring the independent contractor designation shall apply for an independent contractor exemption unless they have elected to be bound by one of the three workers' compensation plans. (certain exceptions under 39-71-401, MCA, (2)(r)(iii) or (2)(r)(iv) can apply). Care must be taken to verify that either an exemption certificate or proof of workers' compensation exists. A bulletin by the Montana Department of Labor & Industry, in 2007, stipulates that "Failure to obtain the exemption certificate or workers' compensation insurance will result in the state treating the worker as an employee of the hiring agent. Hiring agents will be responsible for the claims for injuries or occupational diseases and payment of premiums on the wages of those considered their employees".

The implications of this can be very expensive! So how can you guard against a problem such as this? Always request a certificate of insurance, not only verifying liability insurance, but also workers' compensation if the contractor has elected one of the three compensation plans. If workers' comp. has not been elected, then require a copy of the independent contractor exemption certificate. (a note on any insurance certificate: The cert. is only a 'snap shot' in time the information on that form is verified as of the date of issue. Also, a certificate does not alter anything contained in the insurance policy/policies for which it was issued).

A homeowner may also have a little more 'protection: 39-71-401, MCA: "Employments covered and exemptions"-stipulates that the Workers' Compensation Act does not apply to...." (b) casual employment. (39-71-116, MCA,"Definitions"-"Casual employment means employment not in the usual course of trade, business, profession or occupation of the employer."). This may give some relief but always check with your legal counsel if in doubt! And, watch out for the "control factor"!

39-9-207, MCA, "Contractor Registration" provides that "a person who...engages a construction contractor who is registered under this chapter on the date of the contract is not liable as an employer for workers' compensation coverage under 39-71-405, for any unemployment insurance coverage, or for wages and fringe benefits for:(1) the registered construction contractor; (2) the employees of the registered construction contractor; or any subsequent subcontractors or the employees of any subsequent subcontractor...".(emphasis mine).

It is easy to see that there are many pitfalls and problems in something so seemingly uneventful as having your home reroofed or damaged property repaired but those problems can become very expensive. Questions relating to these issues can be addressed to either the Independent Contractors Control Unit with the Dept. of Labor & Industry or to your legal counsel.

Article By: Dennis Gambill - The author is an Insurance Litigation consultant. Adjunct professor at EMC for 8 years-Risk & Insurance. 40+ years-both MGA and agency experience.