Ghost Workers' Compensation Insurance Harm Injured Workers

Good general contractors demand proof of Workers’ Compensation insurance before hiring subcontractors. This type of insurance–commonly known as Workers’ Comp–protects workers if they are injured on the job by paying for their medical bills and other costs. But today, the News & Observer published a story that sheds light on a scam that puts workers at risk, leaving them vulnerable and unprotected.

Real insurance is expensive, but it is one of the costs of doing business–if you own a business and expect your employees to perform potentially dangerous work, then you need to protect them. To get around the costs, the scheme involves subcontractors purchasing “ghost” insurance instead of actual workers’ comp insurance. The the newspaper article described the case of contractor and employer Jimmy Worrell, and one of his long-time workers, Clementé Hernandez Gonzalez. According to the article, when Jimmy Worrell wanted proof of insurance coverage for his five-man crew, he apparently lied about the nature of his business:

He told his insurance agent that he had no employees and would exclude himself from the policy, his right as a sole proprietor. He declared that the crew of five he managed was made up of independent contractors instead of employees; the policy he bought covered a “ghost,” an unknown employee who might unexpectedly join him to work during the year.

The certificate he received looked the same as the one he would have gotten had he purchased actual workers’ comp insurance for all his employees. This allowed Worrell to be hired by general contractors who demanded proof of insurance.
How “Ghost” Insurance Fails
Ghost insurance amounts to a piece of paper with nothing behind it–there’s no actual protection. Worrell’s decision to purchase ghost insurance instead of workers’ comp insurance is now bringing attention to this issue, as illustrated by the tragic case of Clementé Hernandez Gonzalez. According to the article, he severely injured his spinal cord in March 2009 after another employee fell asleep at the wheel and wrecked the company vehicle. Gonzalez feels nearly nothing from the chest down; experts predict a lifetime of care will cost nearly $8 million…and because he didn’t have actual workers’ comp coverage, he has not yet received a single check to help cover his medical and living expenses.
It’s unclear how many of the roughly 140,000 policies sold to North Carolina businesses each year are these bare-bones policies. No one keeps official count, but the North Carolina Rate Bureau knows of about 16,000 of the ghost policies written for high-risk employers that couldn’t buy workers’ compensation insurance on the open market….

Officials at the Industrial Commission have seen the ghost policies for years, but they have not asked the legislature to address the practice. And when they see insurance agents sell ghost policies in improper circumstances, they rarely, if ever, report the problems to the Department of Insurance, which regulates agent conduct.

Such failure to communicate among state agencies has enabled business owners who break the law to flourish, while those following the law say they are increasingly shut out of work because of the high costs of doing business legally.

For injured workers like Gonzalez, working under a ghost policy is like walking a tightrope with a hole cut in your safety net. Since his catastrophic injury, Gonzalez has lost his home, and he cannot afford to get the optimal kinds of treatment for his level of severe injury.

At HensonFuerst, we don’t understand how ghost policies continue to be allowed to be written. Greed is a good guess. We represent many cases of catastrophic injury, and many workers’ comp cases. Even with the best insurance, injury changes lives. The financial compensation is necessary to help someone survive, but it doesn’t come close to compensating individuals and families for a lifetime of paralysis…or missing limbs…or blindness…or any of the other serious injuries we see everyday.

We hope that this series of article in the News & Observer will spur legislators and industry insiders  to change the way workers’ compensation policies are written. People who put their health on the line for their employers are owed that much.

To learn more about Workers’ Compensation, visit our website at

To read the full article in the News & Observer, click here:  Injured Worker Pays for Employer’s Gamble

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