In response to the audit, BCAM assessed Laser Line an additional premium charge of $12,006 for the coverage period, relying on the amounts Laser Line had paid to the putatively exempt subcontractors. BCAM demanded that Laser Line purchase coverage for all its exempt subcontractors unless those subcontractors independently had secured workers' compensation coverage.

Laser Line refused to pay premiums for employees of subcontractors who had fewer than five employees, claiming that they were exempt from the coverage requirement.

In response, BCAM canceled Laser Line's coverage for the period then in effect (July 27, 2011 to July 27, 2012).

Laser Line sued BCAM for breach of contract (including breach of the covenant of good faith and fair dealing), a declaratory judgment, and defamation. BCAM filed a counterclaim for damages.

The trial court partially granted Laser Line's motion for summary judgment and denied BCAM's motion for summary judgment. The trial court reasoned that because “every one of Laser Line's subcontractors was certified to be exempt under [the Act], Defendants had no contractual basis to demand additional premium[s] for Laser Line's exempt subcontractors or to cancel Laser Line's Coverage Agreement.”

The dispute reached the Mississippi Supreme Court.

The BCAM Policy

Regarding “remuneration,” the BCAM policy provided:

Premium for each work classification is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the period of this Agreement for the services of:

1) All of your officers and employees engaged in work covered by this Agreement; and

2) All other persons engaged in work that could make us liable under Section 1 (Statutory Workers' Compensation Coverage–Part A) of this Agreement. If you do not have payroll records for these persons the contract price for their services and materials may be used as the premium basis. This paragraph (2) will not apply if you give us proof that the employers of these persons lawfully secured their workers' compensation obligations. 

Mississippi law provides:

In the case of an employer who is a subcontractor, the contractor shall be liable for and shall secure the payment of such compensation to employees of the subcontractor, unless the subcontractor has secured such payment.

Miss. Code Ann. § 71–3–7(6)

The Mississippi Supreme Court's Decision

The court reversed.

In its decision, the court explained that Mississippi Code Section 71–3–7 mandated that general contractors secure workers' compensation coverage for the employees of its uninsured subcontractors.

Here, the court said, Laser Line, a general contractor, chose to use subcontractors that employed fewer than five employees and that did not secure workers' compensation coverage. Under the statute, the court said, an employee of a subcontractor of a general contractor came within the provisions of the workers' compensation law. That is, the court reasoned, the law had the effect of making employees of a subcontractor, where the subcontractor did not carry insurance for the protection of its employees, the employees of the general contractor within the meaning of the Workers' Compensation Act – thus obligating Laser Line to secure workers' compensation coverage for the employees of its uninsured subcontractors.

The court concluded that the number of employees of the subcontractor was “not a factor in determining general-contractor liability under the Act.”

The case is Builders and Contractors Ass'n of Mississippi v. Laser Line Construction Co., LLC, No. 2016–IA–00397–SCT (Miss. June 29, 2017). Attorneys involved include: ATTORNEY FOR APPELLANTS: H. WESLEY WILLIAMS, III; ATTORNEYS FOR APPELLEE: MITCHELL HARRY TYNER, STEVE C. THORNTON.