In a case dealing with the statute requiring contractors to obtain a certificate of insurance from their subcontractor, the board holds that the contractor fulfills its obligation by obtaining a certificate of insurance from the sub-subcontractor.

This case involved the interpretation of §2311(a)(5) of the Delaware Code which requires contractors on construction sites to obtain from their subcontractors and retain for three years a valid certificate of insurance. The statute provides that the failure to do so shall make the contractor liable as the insurer of any workers' compensation claims that occur to employees of the subcontractor. The claimant was doing roofing work for Subcontractor B when the ladder he was climbing on became detached from the roof and he fell to the ground sustaining injuries. The general contractor on the job site was Contractor A, and below them was Subcontractor A, which was a subcontractor who had, in turn, subcontracted with Subcontractor B as the employer of the claimant. Contractor A had been provided with a certificate of liability insurance by Subcontractor A, and, likewise, Subcontractor A had been provided with a certificate of insurance from Subcontractor B. However, unbeknownst to Contractor A and Subcontractor A, the insurance policy which Subcontractor B had was cancelled on July 10, 2008, and the claimant's injury occurred on July 31, 2008. The case came before the Board on a legal hearing in which Contractor A and Subcontractor A requested dismissal of the petitions filed against them on the basis that they had complied with the statute. Initially, the Board agreed that Contractor A's Motion to Dismiss should be granted since they had obtained a valid certificate of insurance from Subcontractor A which remained in effect. It was a closer call as to the Motion to Dismiss of Subcontractor A. The Board framed the issue as whether that entity had an affirmative duty not only to obtain the certificate of insurance but to make certain that it remained in effect during the policy period. The Board concluded that Subcontractor A had no such affirmative duty to assure that the certificate of insurance it had obtained from its subcontractor remained effective during the term of the policy. Instead, the Board found that Subcontractor A was entitled to rely in good faith on the certificate of insurance with which it had been provided. Accordingly, Subcontractor A was also dismissed from the litigation. The Board did point out that if Subcontractor A had actual knowledge that the certificate of insurance was no longer valid, the result might be different.

Case Law Alert - 3rd Qtr 2011