Can a company get out of paying a contractor if the contractor does not have insurance?

UPDATED: Nov 4, 2011

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Can a company get out of paying a contractor if the contractor does not have insurance?

My boyfriend works for a small independently owned company, that apparently did not have all their ducks in a row when they started doing contract work. The did not have insurance for the company itself, but all of the “employees” are independent contractors themselves. They did a lot of work over the last 3 months for a large corporation. The corporation is now saying they will not pay the invoice until the small company that already did the work, gets insurance. Is this a legitimate claim?

Asked on November 4, 2011 under Business Law, Washington


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Good question. In order to answer your question, one would have to carefully read the written contract between the company that your boyfriend works for and the large corporation to see if having insurance was a requirement for the contract. The written contract between the two companies sets forth the obligations owed to the other in the absence of conflicting state law.

Most likely the large corporation has to pay under the contract what is billed regardless of insurance placement. The reason is that your boyfriend's company most likely will be unable to get insurance retroactively.

Perhaps a business attorney should be consulted to read the contract between the large corporation and the small independently owned company?


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