Workers Comp Settlements for Independent Contractors

Personal Injury Case Study

Are workers comp settlements justified for independent contractors? This construction accident case discusses some important legal issues in workers compensation and product liability cases. We’ll cover the specifics of the accident, damages, liability, negotiations, and the final settlement.

The Accident…

Michael was working as a carpenter at a construction site where GenCor was the General Contractor. He had been at this particular job-site for the previous 3 months on a long term project framing a multi-unit apartment complex.

While cutting a 2×4 with a chopsaw, Michael cut his finger because the safety guard broke as the blade hit the 2×4, which then failed to protect his finger from injury. His right index finger was nearly severed from his hand.


Initially there was a question as to whether Michael was an employee or an independent contractor (he would not qualify for a workers comp settlement from GenCor’s insurance if he was an independent contractor). The adjuster had to apply several elements of the test to answer this question:

1) Did Michael bring his own tools to the job site? Yes.

2) Did Michael set his own hours? Yes.

3) Was Michael paid weekly, monthly or daily? Daily.

4) Were Michael’s taxes taken from his check? No.

Because Michael purchased and used his own tools, brought them to the job site, set his own hours making it possible for him to work for others, was paid day wages (vs. monthly or weekly) and was responsible for taking his own taxes from his check, he was considered an independent contractor NOT an employee.

As a result, Michael was not covered by the workers compensation policy of Gen Cor, nor was he required to be.

While Michael used his own insurance coverage, he consulted with an attorney anyway who advised him that he could not get a workers comp settlement. He did however have a products liability case against the manufacturer of the saw used to cut the 2×4 (because of the faulty safety guard).


Michael’s right index finger was nearly severed from his hand and remained attached by one tendon and some bone. His co-workers immediately wrapped his entire hand in ice and drove him personally to the nearest emergency room.

There, an orthopedic surgeon was immediately called who was able to save the finger and re-attach it, but not before Michael suffered significant nerve and tendon damage. He was also unable to straighten the finger and using both hand tools and saws was more difficult since it was his right hand.


Michael did not have any insurance company with which to negotiate so he merely paid his out-of-pocket medical expenses of $1,650 and incurred $26,000 in covered medical bills as a result of the emergency room visit, consultation, surgery, physical and occupational therapy and follow-up visits.

When he was finally released from treatment and considered to be 95% recovered, Michael re-visited the products liability attorney to discuss his options. The attorney agreed to take the matter on contingency and be paid 33 1/3% plus expenses of the settlement.

He filed a lawsuit against the designer, manufacturer and distributor of the saw blade; Because products liability cases are strict liability, proving that they were at fault amounted only to showing that there was, in fact a defect in the product, which though used properly still resulted in a serious injury.

Final Settlement…

Michael’s attorney was first offered a mere $15,000 in hopes that this would entice Michael and his attorney not to go to trial. Michael’s medical bills and out-of-pocket expenses totaled $27,650 and his lost wages at $150 per day were $3,000.

Michael’s attorney set the matter for trial and on the day before it was set to go forward, the product designer and manufacturer agreed to settle the case for $150,000. The distributor had been dismissed from the cause of action early on.

Important Points…

  • If you are an independent contractor, you will not be covered by the workers compensation policy of the person who writes your check. You must get your own insurance coverage.
  • There are several questions to ask to determine whether a person is an employee or independent contractor (see above).
  • Products liability cases are governed by strict liability, not negligence.
  • Sometimes you’ll actually have to file the paperwork for a lawsuit to prompt a fair settlement offer from the insurance company.

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