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Sole proprietor not required to have workers’ comp insurance

A working owner of an unincorporated business is not an employee within the meaning of the Virginia Workers’ Compensation Act. Further, the business’ customers do not employ the business’ workers.

As a result, the business owner was not required to obtain workers’ compensation insurance because the business did not have at least three employees.

Consequently, the owner’s auto insurer is liable for injuries one of the workers’ suffered when the owner was in a car accident while transporting the worker to a job site.


Plaintiff New South Insurance provided car accident insurance to defendant Lopez. Lopez operated “Susana’s Cleaning Service,” an unincorporated business that did not have a workers’ compensation insurance policy. The New South auto policy excluded coverage if worker’s compensation insurance was available.

Lopez hired two individuals to help her clean houses. Otero, one of the individuals, was injured when Lopez was involved in an accident while driving Otero to a customer’s home. Otero was injured and sued Lopez.

New South seeks a declaration that the it has no duty to defend or indemnify Lopez because Otero can pursue a workers’ compensation claim. “Otero argues that the Policy’s exclusion does not bar her claim because Lopez could not have been held liable under the VWCA as the statute only applies to employers with three or more employees.”

No coverage required

“The first issue is … whether Lopez is an employee of her unincorporated business and, as a result, qualifies as the third employee under the VWCA. …

“Viewing the record in the light most favorable to Otero, Lopez only had two employees regularly in service. Lopez employing less than three individuals would mean that she is not automatically subject to the VWCA, and Otero could not bring a viable workers’ compensation claim against her.

“New South nevertheless maintains that the Court must consider whether Lopez herself is an employee of Susana’s Cleaning Service.

“The VWCA defines employees as persons ‘in the service of another under any contract of hire or apprenticeship.’ … (emphasis added). Under the statute’s plain language, a proprietor of an unincorporated business does not fit neatly within such a definition. Lopez was neither under a contract of hire to Susana’s Cleaning Service nor was she an apprentice of her own business. …

“Lopez never formally created a legal business entity but informally conducted business under the name Susana’s Cleaning Service.

“Because Susana’s Cleaning Service did not have an office, the Court can infer that Lopez conducted her business from her home. She owned all the assets of this business, including a bank account under the business’s name, and there is nothing in the record suggesting anyone else was liable for the business’s debts. Additionally, her business involved cleaning private homes for only part of the week.

“This Court finds that Lopez is a sole proprietor based on the undisputed evidence.”

Customers not employers

“New South alternatively posits that ‘in the service of another under any contract of hire’ can encompass workers in service of customers rather than just to their employer. … New South’s argument implies that the true employers could also be the customers of Susana’s Cleaning Service and, consequently, that New South would not be liable for Otero’s injury under its Policy with Lopez.

“However, this interpretation is a strained construction inconsistent with the statutory scheme. The record does not indicate that Otero is under a contract of hire to any customers of Susana’s Cleaning Service but rather performs services as directed by Lopez.

“To the extent that any employment contract for Otero exists in this case, the contract is between Otero and Lopez. The scope of the VWCA encompasses the relationship between an employer and its employees rather than between the employees and the employer’s customers. …

“As the record currently stands, there is no evidence of any employment relationship between the customers and Otero. This forecloses an assertion that the customers have amassed the three employees necessary for the VWCA to apply to Otero’s injury.

“For these reasons, Otero cannot be considered the employee of the customers and, thus, the liability for her injury still rests with Lopez and, by extension, New South. …

“[T]he Court shall enter an Order denying New South’s Motion for Summary Judgment[.]”

New South Ins. Co. v. Lopez, et al., Record No. CL-2021-3635, Nov. 16, 2022. Fairfax County Circuit Court (Bernhard). Jeremy S. Tishler, Steven M. Levine for plaintiff; Kevin M. Leach for defendant Otero; Eric M. Persian for defendant Lopez; Paul Todd Copeland, defendant pro se. VLW 022-8-073, 11 pp.