Filing a Homeowner Liability Claim When Injured Working "Off the Books"



Imagine you're a licensed electrician laid off from your full-time job. Your neighbor needs help building the new extension on his home. He offers to pay you "off the books" to install all the electrical outlets in his new extension. You could use the cash.

The money from this off the books job may sound enticing, but before taking the job you should stop and think about the possible consequences. At the very least, it's a good idea to know a little about homeowner's liability and insurance coverage.

What happens if your neighbor drops a two-by-four on you, or the electrical circuit you're completing shorts out and burns you? What will happen if your injuries are serious enough to keep you from working for days, weeks, or even months? Suddenly, that cash may not seem so important.

If your injuries occurred at your previous full-time job, you'd probably get worker's compensation benefits. That would cover your medical bills and most of your lost wages. You wouldn't have to worry so much about paying the rent.

However, if you're hurt while working off the books for your neighbor, there's no worker's compensation to cover your medical bills and lost wages. The insurance you previously relied on to protect you and your family is gone.

Injury Compensation

If while working on your neighbor's extension, you mistakenly crossed the wires and caused your own injury, the medical payments (MedPay) portion of your neighbor's homeowner liability insurance should cover your medical bills up to $1,000. However, that's only your medical bills. You get nothing for lost wages, out-of-pocket expenses, or pain and suffering.

If you've suffered more serious injuries, and can prove your neighbor was negligent when he dropped that two-by-four on you, you can try to file a lawsuit against him. But the lawsuit may be limited to compensation for your medical bills and pain and suffering. Here's why...

No Money for Lost Wages?

Remember, you're working off the books. When you hire an attorney to sue your neighbor, the attorney will ask for copies of your medical records and bills, receipts for out-of-pocket expenses, and proof of your lost wages.

Herein lies the rub. If you're working off the books, your neighbor has probably paid you in cash. That means you haven't paid your state and federal income taxes on that money. Your only proof of the wages your neighbor paid you is the new flat-screen TV you bought. That's not going to cut it.

Your attorney will tell you if you want the lawsuit to include a demand for your lost wages, you'll need to give the homeowner's insurance company some legitimate verification of the income from your neighbor.

If he's a smart attorney, he'll also say that if you haven't paid taxes on the money your neighbor paid you, and persist with the demand for lost wages, you're incriminating yourself. According to the IRS, not paying your income taxes, especially when your income is above $9,750, is a crime.

If your neighbor paid you less than the minimal IRS requirement of $9,750, you still may have to worry about failure to pay your state's income taxes. Every state has a different minimal amount above which you must file a tax return.

If you didn't deposit that cash in a bank account, and you probably didn't, and if your neighbor didn't give you any pay stubs, and he probably didn't, you and your attorney will have a tough time convincing the insurance company there are any lost wages.

Unfortunately your word isn't good enough. You can bet the insurance company won't give you the benefit of the doubt. You'll have to rely on your neighbor writing a letter detailing the exact amount of payment, which he may not be willing to do, being that you're suing him.

Without verifiable proof of lost wages, you'll have to rely on the pain and suffering portion of your lawsuit to cover living expenses while you're laid up and can't work. Unfortunately there's never a guarantee of payment for pain and suffering.

Here's something else to consider. Let's say you were working full-time as an electrician for a large company when you were injured at your off the books job. Your neighbor's negligence caused the injury. The worker's compensation insurance from your full-time job won't cover your damages since you weren't hurt while on the job. In this case, you have to rely on your attorney winning the lawsuit.

Unemployment Benefits

If you apply for unemployment insurance, you're likely to run into the same problem. Like the homeowners insurance company, the government must have verifiable proof of your lost wages. Without proof, in all likelihood, unemployment will deny the claim.

The moral of this story is to think before you agree to work anywhere off the books. What may sound like an easy way to make some quick cash can just as quickly turn into a nightmare of extended unemployment, with no income to pay your bills.

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