In Massachusetts, as it is in most states, employers are required to obtain Workers’ Compensation insurance covering their employees for injuries sustained while working.  Often, prospective clients of a service company may request proof that coverage exists.  A certificate of Worker’s Compensation insurance indicates that the “Named Insured” has purchased insurance for their employees. However, when obtaining a certificate from a company who has partnered with a PEO, it can be confusing since the PEO is listed as the named insured in many states (Massachusetts included), rather than the company who is providing services.

Consider this scenario.  You wake up the morning after an immense wind storm and discover an ample amount of tree debris in your back yard.  Fearing the labor of clean up, you decide it is best to hire a cleaning restoration services company to do the job for you.  You remember that it is important to obtain proof of insurance covering your liability if a worker is injured on your property, so you ask the cleaning company to provide proof of coverage.  If this company has partnered with a PEO, the certificate will show the PEO as the named insured.

Upon receiving the certificate, you wonder, “Why is the PEO the named as the Insured?  The PEO staff isn’t coming into my home and performing the job! What about the company I am hiring? Could I be liable if someone is injured?”  These employees are in fact, covered through the PEO.

In Massachusetts, consumers should ask for a certificate of Workers’ Compensation insurance.  There are eight key components that should be completed in the entirety, when a PEO is the named insured:

  1. Date (at the top of the certificate)
  2. Producer (insurance agency name)
  3. Insured (PEO’s name and address)
  4. Insurance Company Name
  5. Policy Number
  6. Effective Dates
  7. Description of operations that includes this language: “This replaces any prior certificate issued to the certificate holder affecting Workers’ Compensation coverage.  Coverage is restricted to employees leased to (PEO Client Company Name).
  8. Certificate holder which should include the name of the consumer.

In Massachusetts, through the co-employment arrangement between the PEO and the client, the PEO is responsible for securing Workers’ Compensation insurance.  To learn more about how the rules apply to PEOs in states outside of Massachusetts, visit the NAPEO website.