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Last Modified on May 04, 2025
In North Carolina, it’s legal for the insurance industry to accept payment for a fake or entirely useless document, called a ghost insurance policy. This piece of paper is issued without insurance coverage for any active employees, so it provides no benefits. It is used to satisfy licensing needs or contractual requirements. The Sumwalt Group Workers’ Comp and Trial Lawyers can explain how a North Carolina workers’ compensation ghost policy could impact you as a business owner or employee.
What Is a Ghost Policy in North Carolina?
In North Carolina, many employers are required to carry workers’ compensation insurance. A ghost policy allows companies to satisfy the state’s requirement to have purchased insurance coverage when they, in fact, have not actually covered any employees in the event of a work-related accident or illness. Many states have made these policies illegal, but North Carolina has not.
These fake policies are often utilized in the construction industry. If a contractor gets a Certificate of Insurance, they are relieved of legal responsibility for work injuries and illnesses. As a result, they often ask their subcontractors to get a Certificate of Insurance before beginning work.
Subcontractors then go to an insurance agent to purchase a Certificate of Insurance. The insurance agent asks whether the subcontractors have any full-time employees. If the subcontractors are self-employed without any employees or plans to hire any, the insurance agent takes the subcontractor’s money and issues a simple piece of paper, promising phony workers’ compensation coverage.
In case of a work injury, the subcontractor doesn’t have coverage since they didn’t purchase an actual contract. This means those injured in this often-dangerous field of work do not have sufficient protection.
Additionally, contractors and small business owners may use ghost policies to:
- Meet North Carolina general contractors’ requirements that they have workers’ comp insurance.
- Meet licensing requirements.
- Bid on contracts requiring a Certificate of Insurance.
Ghost insurance policies might feel like an insurance loophole, but they are allowed in specific circumstances. However, it’s important for employers and employees to understand that proper workers’ compensation coverage is essential for protecting workers in the event of a workplace accident or illness. A ghost policy does not provide any workers’ compensation benefits or protection for either employers or employees.
For business owners, it’s important to know that these policies are typically subject to formal audits. These make sure businesses are complying with the policy’s conditions and have not hired any employees since the ghost policy was purchased. Also, you may be asked to formally acknowledge that you’re exempt from the state laws requiring workers’ compensation for all employees before a carrier issues a ghost policy.
Workers’ compensation insurance exists to protect both employers and employees. Workers are protected because they can recover benefits without having to prove anyone is at fault for their injuries. Businesses are protected because it limits the ability of employees to sue employers for negligence in their workplace, and business owners are not personally liable for worker injuries.
Ghost Policies and Self-Employment in North Carolina
When self-employment was last studied in the U.S. in 2015, approximately 15 million people were self-employed, which equaled about 10.1% of all workers in the U.S. The Bureau of Labor Statistics (BLS) estimated that, from 2016 to 2026, the self-employment workforce would increase by 7.9%.
Many businesses throughout the Tar Heel State operate without any employees or subcontractors, which means businesses in your area may purchase ghost insurance policies. The BLS further reports that self-employment rates remain high throughout North Carolina, and a significant proportion of these are unincorporated without employees.
When last investigated, North Carolina recorded about 16,000 ghost insurance policies out of a total of 140,000 policies written in one year. Throughout our state, ghost policies are purchased by:
- Partnerships
- Sole proprietors
- Businesses without any employees
- High-risk companies that cannot get traditional North Carolina workers’ compensation insurance coverage
Filing a Workers’ Compensation Claim in North Carolina
Filing a workers’ comp claim in North Carolina involves filing Form 18 with the North Carolina Industrial Commission (NCIC), but you should take other steps after an injury to give this claim a better chance. These include:
- Reporting your injury to your employer as soon as you can
- Getting medical treatment, either on-site or from an approved medical provider, except in emergency situations
- Informing the medical provider that your injury is from a work-related incident, and providing the name of your employer
- Providing official written notice of your injury to your employer as soon as you can, but within 30 days, stating the date of the accident and the injuries you sustained
- Adhering to the treatment plan set out by the medical provider
If you are severely injured after the incident and cannot report it, it’s important to do so as soon as you can, or request a friend or family member to provide that information. Failing to report the incident or provide written notice by the deadline can make it harder to have your claim approved, and it may prevent you from recovering compensation.
Why You Should Hire a Workers’ Compensation Lawyer
With so many ghost policies being purchased throughout North Carolina, it is important to protect yourself. If you are hurt or injured due to your job, contact an experienced workers’ compensation attorney right away. They can make sure your company is following the state’s requirements for workers’ compensation and assert your rights.
If you are an employee and you should be covered by workers’ comp insurance but are not, an attorney can assess how to hold your employer liable and recover your benefits. If you are covered by workers’ compensation insurance, an attorney can also assist with this process.
Workers’ compensation is supposed to help employees recover quickly and offset the financial impact of serious injuries and illnesses. Even though these policies are very useful for workers, it can be hard to get your benefits. Employers may say that your injuries were not work-related or that you are an independent contractor when you are not.
An attorney can provide reliable legal help through the claim process. They can explain all available avenues of recovery to seek the full compensation you deserve for your injuries.
An attorney can calculate your benefits and negotiate on your behalf. If your employer or their workers’ compensation insurance disputes your claim, your lawyer can help you file an appeal with the NCIC. This can let you keep pursuing the benefits you are owed, even if your employer denies them. The support of an attorney can improve your chances of securing fair compensation after a workplace injury.
FAQs
Why Is It Called a Ghost Insurance Policy?
It’s called a ghost insurance policy because there isn’t any actual coverage. The policy is insubstantial and provides no real benefits. There’s no actual policy that’s issued, and no one is covered under the policy’s mock terms. It is a piece of paper with a fake policy designed to protect the business owner. Unless a self-employed business owner specifically purchases workers’ comp insurance, they haven’t bought any coverage or insurance protection.
Can Subcontractors Protect Themselves Under NC Ghost Insurance Policies?
A subcontractor can purchase workers’ compensation coverage to make sure they have insurance coverage if a worker is hurt at the job site or sustains a job-related illness. Although it can be expensive, workers’ compensation enables you to help your employees, and it can protect you from personal liability. Also, the cost of always having to buy ghost insurance policies without any protection only provides a false sense of security.
Does a Business Owner Have Coverage If They’re Hurt and Have a Ghost Policy?
If you’ve bought a ghost policy as a sole proprietor NC business owner, and you’re injured or become ill, you won’t have any insurance coverage. You may have to use your own personal health insurance to cover your injury or illness costs. While you may have that piece of paper to serve as your Certificate of Insurance for some specific purposes, it unfortunately won’t help you recover your costs after an accident or illness.
Can I Hire an Employee After I Purchased a Ghost Insurance Policy?
You cannot hire any employees unless you purchase valid workers’ compensation insurance. If you rely on a ghost insurance policy and plan to hire a new employee before the end of your insurance term, you must notify your insurance company right away. Then, you can buy a state-compliant workers’ compensation policy to provide benefits for your new employee if they are hurt or suffer a work-related illness.
Consult a North Carolina Workers’ Compensation Attorney
When you hire a workers’ compensation lawyer, they can advocate for your rights and protect your financial interests. When you are navigating complex issues involving ghost insurance policies and state-mandated workers’ compensation benefits, contact the experienced team at The Sumwalt Group Workers’ Comp and Trial Lawyers. Our attorneys have helped employees throughout North Carolina for the past 20 years and have accumulated 45 years of combined legal experience.
We’ve helped employees manage their workers’ comp claims, file third-party claims, and pursue personal injury claims in state court. Whether you live in New Bern or Charlotte, our office can provide reliable guidance from exceptional attorneys. Contact The Sumwalt Group Workers’ Comp and Trial Lawyers today to schedule a consultation.
