Opting out of insurance can be a risky proposition

First, if the independent operator suffers a workplace injury, he or she will not be entitled to workers’ compensation benefits. Second, the greater risk involves an injury to a third party.  For instance, if an independent operator contracts to work with an employer registered under the workers’ compensation insurance scheme and a worker of that employer is injured due to the independent operator’s negligence, the board may have a right of subrogation.

Where workers’ compensation legislation does not extinguish a worker’s right to sue a party for a workplace injury, the worker or his or her survivors must elect to bring an action or to claim compensation benefits.

One instance where the legislation allows for an election is in the case of negligence by a third party (i.e. someone other than the employer or its workers and a person not covered under the workers’ compensation scheme). If the injured worker, or his or her survivor, elects to claim compensation benefits rather than bring an action, the board becomes subrogated to the rights of the worker — allowing the board to step into the shoes of the injured worker and sue any party the injured worker could have sued.

If the damages collected by the board through an action against a third party exceed the costs of the claim for benefits and costs expended in pursuing the action, the worker or his or her survivors are entitled to the excess amount recovered.

Risks to independent operators
Where a worker, or his or her survivor, is entitled to benefits under the no-fault workers’ compensation scheme, there is little motivation for them to spend time, effort and money to pursue an action against a third party where negligence may or may not be proven.

On the other hand, the board with greater resources has the ability to pursue an action against a negligent third party.

An independent operator who carries private insurance may be protected and may only be adversely affected by way of increased insurance premiums. An independent operator who does not carry any insurance may find themselves in a difficult position. Although the board may be less likely to sue a third party that does not have any insurance, the risk remains.

This risk is not limited to independent operators who carry out manual labour. For instance, a health and safety or engineering consultant that offers advice to an employer, which results in or contributes to a workplace injury, may be sued by the board. 

Mitigating potential risks
The best way for an independent operator to mitigate risk is to voluntarily register for workers’ compensation insurance, if not mandatorily required to do so. Currently, Alberta, Saskatchewan, Manitoba, New Brunswick and Ontario (commencing next year) mandate coverage for independent operators, but only in the construction industry. Independent operators in all other industries are not required to register for workers’ compensation insurance, leaving them vulnerable.

In some cases and depending on the circumstances, an independent operator may ask to be deemed to be a worker of a registered employer, and thus, entitled to the ensuing benefits. However, since such a determination would likely only be made after an incident has occurred and is fact-specific, it is not preferable.

Optional workers’ compensation coverage not only offers protection—at a relatively low cost— against liability for negligent actions by third parties in relation to workplace injuries, but also provides for benefits to the independent operator if he or she is injured at the workplace.

The next best protection is offered through private insurance. Every independent operator, at a minimum, should carry extended health and disability insurance as well as appropriate liability insurance.

It is also advisable to carry some liability insurance even if one is registered for workers’ compensation insurance. This protects them against claims by individuals that are themselves not entitled to workers’ compensation benefits because they or their employer is also not registered with the board. Therefore, the right of these individuals to sue would not be extinguished under workers’ compensation legislation.