Under the Colorado Workers’ Compensation Act, any sole proprietor actively engaged in the business may elect to be included by endorsement as an employee of the insured and shall be entitled to elect coverage regardless of whether such sole proprietor employs any other person under any contract of hire. Thus, while workers’ compensation insurance for a sole proprietor is not required, the Act enables sole proprietors to obtain coverage for themselves. In an effort to save money, many sole proprietors choose to forego workers’ compensation insurance, likely assuming that if they are injured on the job, the party who contracted for their services will be monetarily liable for their injuries. However, foregoing such coverage puts a sole proprietor at risk of being limited in the amount of recoverable damages in a third-party action.
In fact, the Court in Calveri v. Anderson, 2012 COA 122, recently held that a sole proprietor contractor who was injured on the property where he was performing tilling work was statutorily limited to $15,000 from the homeowners. This is because under Colorado statute, homeowners are not required to carry workers’ compensation insurance covering a contractor performing maintenance or repair at their home. The purpose of this is to encourage participation in the workers’ compensation system and limit the exposure to those who have lawsuits or claims brought against them by uncovered contractors who are injured on the job.
Essentially, if you are a sole proprietor and you choose to opt out of workers’ compensation coverage to save money on premiums, you cannot then make up for it on the back end by suing the employer under common law for your work related injury. If you are a sole proprietor and want to protect yourself and ensure you are fully compensated for your injuries, the best thing to do is obtain workers’ compensation insurance coverage for yourself.
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