Small business insurance question.?

I own a flooring business. One of the flooring shops that I subcontract out of just went through an insurance audit. The owner of the shop called me frantically asking for my insurance company to send over proof of my liability insurance. I called my insurer, and apparently my coverage had lapsed. At that point I realized that there was nothing I could do but start a new policy and fax over the new information. My question is, what is the penalty for something like this? And will I have to pay any of it being the subcontractor? I dont have an excuse to why it lapsed other than I am relatively new to all of this. Can the flooring company withhold money that they owe me for jobs I completed because of this lapse in insurance? I'm really freaking out.

Penalty for you? None, unless that shop stops giving you business. HE will get charged as if you are his employee, on his audit, as you were uninsured. So HE is going to get NAILED for an additional premium.

You will have to check your contract with him, to see if there's a penalty involved. Typically, though, he won't PAY you until/unless you provide him with his certificate. If you CAN'T provide him with that certificate, he very well might subtract the additional premium out of the money he owes you. Because it's going to cost him, well, if you did $50,000 of work for him, it could cost him $6,000 to $7,000 of insurance audit, between the GL and the Workers Comp.

When he hires you to do work for him, he owes you the amount of the contract. It's important that you have general liability AND workers' compensation insurance to protect yourself and your customers. That doesn't necessarily affect what a customer owes you for a job. If you have employees and you don't buy WC insurance to cover them, that could result in you being charged a penalty. So, if you can't prove that you have your own insurance, your customer can be fined for not providing WC insurance for you "his employee".

Go into your state's Dept. of Labor website and search for definitions of "employee" and "independent contractor." Whatever happens in this situation, you need to be aware of these definitions in your state and your legal liability.