Category Archives: Workers Compensation Premium Audits

Workers Compensation Premium Audits

Claims Management, Construction Practice Group Content, Food & Beverage Practice Group Content, HR Challenges, Human Services Practice Group Content, Transportation Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Signs of a False Workers Compensation Claim

A false workers compensation claim is more common than you might think.  The sooner you call the sooner we can help you work through it.

The workers’ compensation insurance system is a no-fault method, paying workers for medical expenses and wage losses from on-the-job injuries. Billions of dollars of false claims submitted each year, says The National Insurance Crime Bureau. In New York, insurance fraud looked at as a felony that most perpetrators aren’t aware of when deciding to game the system. Further, it’s the number issue most business owners raise with us when we are invited into their organization to check why their workers compensation insurance costs are so high.  When business owners invite us into their organization to evaluate why their workers compensation insurance costs are so high, its typically the number issue.

Most employers face not only being vulnerable to workers compensation fraud but actually contributing to it as they don’t have the correct policies and procedures in place to help prevent fraud from starting in the first place. To help detect a possible false workers compensation claim, experience shows a claim may be fraudulent if two or more of the following factors are present:

Telltale Signs of a False Workers Compensation Claim:

Monday Morning: The alleged injury occurs either “first thing Monday morning,” or late on a Friday afternoon but not reported until Monday.

Employment Change: The reported accident occurs immediately before or after a strike, a layoff, the end of a big project or at the conclusion of seasonal work.

Workers Comp Fraud

Job Termination: If an employee files a post-termination claim:  

Was this injury reported by the employee before being unemployed?

Did the employee exhaust his/her unemployment benefits prior to claiming workers’ compensation benefits?

History of Changes: The claimant has a history of frequently changing physicians, addresses and places of employment.

Medical History: The employee has a pre-existing medical condition that is similar to the alleged work injury.

No Witnesses: The accident has no witnesses, and the employee’s own description does not logically support the cause of injury.

Conflicting Descriptions: The employee’s description of the accident conflicts with the medical history or First Report of Injury.

History of Claims: The claimant has a history of numerous suspicious or litigated claims.

Treatment is Refused: The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.

Late Reporting: The employee delays reporting the claim without a reasonable explanation.

Hard to Reach: You have difficulty contacting a claimant at home, when he/she is allegedly disabled.

Moonlighting: Does the employee have another paying job or do volunteer work?

Unusual Coincidence: There is an unusual coincidence between the employee’s alleged date of injury and his/her need for personal time off.

Financial Problems: The employee has tried to borrow money from co-workers or the company, or requested pay advances.

Hobbies: The employee has a hobby that could cause an injury similar to the alleged work injury.

Suspicious about a claim possibly being an example of workers’ compensation fraud? Don’t hesitate to call us at (914) 357-8444 or CLICK HERE and run your challenge through one of our Risk Advisors. Our staff will perform digital surveillance on your case without having to spend big money on a potential stakeout. 

Claims Management, Construction Practice Group Content, Food & Beverage Practice Group Content, HR Challenges, Human Services Practice Group Content, Transportation Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Why Job Descriptions Save Money On Workers Compensation Insurance

“Do I really need to write job descriptions?” We are asked this question constantly when we are setting up a workers compensation cost containment program. We say absolutely if you want to distinguish yourself AND save big bucks when you purchase workers compensation insurance!  Job descriptions are by no means required by the Dept of Labor, but they are enormously important to smooth and successful recruiting, hiring, and workers compensation claims processes.  They assist applicants in better understanding the position beyond the typical bullet points of a job posting. 

Hiring & Recruiting: From the initial job post on various posting sites like www.INDEED.com, to the interview and hiring stage it’s so important to be specific and communicate to your potential new hire/employee exactly what is expected of them. Typically a business is not hiring a one off for this position as they will most certainly hire more employees for this role in the future. Rather than re-invent the wheel, spend some time and really drill into the job description. It not only helps your potential hires select right fit for them, it will also help you think though what you want in your future employee.

Employee Injuries: We did an article about the most underutilized tool to gain a competitive advantage, this post might seem familiar. It was all about setting up a Return to Work Program also know as Transitional Duty. This is an extremely effective tool in controlling workers compensation costs.  One of the more important components of the Return to Work program is having a proper job description whereby your staff, the insurance carrier adjusters and the treating physicians can get a full understanding of what is entailed for your injured employee to execute their job function. In  absence of a thorough job description often times the treating physician will not authorize medical clearance for the employee to return to work which drives your workers comp costs up significantly. Further your staff and the carriers adjusters if they are fuzzy on job execution they will often arrive at the wrong answer.

It’s helpful if you have job descriptions already built for your potential alternative duty position too so the treating physician might consider this alternative duty job in lieu of their present job. If you want to know more about building out your own Return To Work Program CLICK HERE

Defining exempt vs. non-exempt:   Job descriptions are key to determining if a position qualifies as exempt (a.k.a. salaried without overtime) under the law.  Actual duties, not titles, drive this determination.  A job description that accurately reflects the realities of the day-to-day functions of a role can help you defend against any claims that an employee is being improperly denied overtime.

Identifying “essential functions”: The Americans with Disabilities Act (ADA), as well as many state anti-discrimination laws, requires employers to provide reasonable accommodation to employees with covered disabilities, provided the employee can perform the essential functions of the job.  A well-written job description is key for identifying those functions that are essential versus those that are marginal, incidental, etc.

Protecting against discrimination claims: Using job descriptions to compare an applicant’s experience, skills and credentials to the minimum qualifications of the job can aid in protecting an organization against claims that it excluded someone based on race, age or other protected class.  Skills and requirements should be identified as minimally required or preferred so it’s clear who meets the bona fide job criteria and who doesn’t.

Need more information on job descriptions? We have a job description tool builder as part of our THINK HR platform which is free to customers of Metropolitan Risk.  We would love to answer any questions you have and assist you in developing them for your organization. Contact Metropolitan Risk today at (914) 357-8444 or click here!

 

HR Challenges, Human Services Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Best Workers Comp Class Codes For Adult Day Care Employees

Virtually every business with employees is required to have workers compensation insurance, as this is mandated by state law contingent on where your company operates it’s business.  It can be difficult to know what workers comp class codes for adult day care business should be used when first applying for a workers compensation policy. 

These are the most commonly used Adult Day Care workers comp class codes that are commonly used in New Jersey and New York:

 Workers Comp Codes for  Adult Day Care facilities in New Jersey:  

  • Code 8868 – Professional Employees & Clerical  
    • This classification has a lower rate and includes your office and medical staff such as administration, bookkeepers, nurses, therapists, and social workers.
  • Code 9106 – Non-Professional Employees & Drivers
    • This classification has a higher rate and includes all of your other employees such as aids and drivers.

Keep in mind that in New Jersey adult day care and senior care facilities provide much more skilled nursing and medical care than do adult day care facilities in states like New York. When selecting which codes to use be mindful of the skilled care versus unskilled care component. There is a significant workers compensation premium cost difference between these two classes of employees. Make sure you spend time on coding the employees correctly.

 

Workers Comp Codes for Adult Day Care facilities in New York:

  • Code 9063 – YMCA, YWCA, YMHA OR YWHA, Institution—All Employees—& Clerical
    • This classification typically has a lower rate includes virtually all your employees except for drivers.
  • Code 7380 – Drivers and Helpers NOC—Commercial
    • This classification has a higher rate and would typically be reserved only for your drivers.

These are the codes that typically are used and generate the bulk of the premium. However, there may be clerical codes for employees that only work clerical functions. There may be Executive Officer codes used for the owners or directors of the facilities. These are good to use for those folks as typically their payroll is capped to a maximum amount. This will vary by state. To truly understand how these codes are used and deployed you must refer to your state’s workers compensation rating boards rules and regulations. There each code has a description for how it’s applied. Similarly to the above example in New Jersey be mindful of the skilled versus non skilled medical component.

Careful about shifting payroll from one class code to another purely because it’s cheaper. In certain states like NY they come down hard on companies that unwittingly evade rates through code shifting. They consider that insurance fraud, which may be a felony in states like NY. So definitely stay away from that!

Finally, in New York you might be eligible for the Safe Patient Handling Credit which is an additional 2.5% off the premium.

 

If you have questions or simply want more information, call a Risk Advisor @ (914) 488-4164.

 

 

 

 

Construction Practice Group Content, HR Challenges, Transportation Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Workers Compensation Insurance for Leased Workers

Many companies are increasingly turning to staffing agencies where they lease employees to meet their needs for a variety of reasons, including increased workloads and high employee turnover rates. Companies that use staffing agencies can save money because they avoid selecting, hiring and training new full-time employees. In addition, using staffing agencies frequently offers companies peace of mind because they know that workers will show up and perform their duties consistently. The question becomes when you employ leased workers from a third party who provides workers compensation insurance for leased workers?

But what happens if one of the staffing agency workers is hurt on the job? Who is responsible for covering the injury? What if the injured worker wants to sue the staffing agency’s client company for negligence? Answering these questions requires a thorough understanding of the employment relationships between the staffing agency worker and the client company. And the way employees are classified affects how the staffing agency and the client company’s workers’ compensation and commercial general liability (CGL) policies apply to work-related injuries.

Workers’ Compensation Versus Commercial General Liability Insurance   

Generally, companies are required to cover an injured employee’s medical treatment and lost wages through a workers’ compensation policy. This is a system of no-fault insurance that affords employees some security while recovering from work-related injuries. In exchange for these benefits, employees waive their right to sue their employers for negligence and related damages. Workers’ compensation provisions apply only where an employer-employee relationship exists between a company and its workers.

Commercial General Liability Insurance policies or CGL for short protect companies when third parties (non-employees) are hurt because of the company’s negligence or misconduct. The issue of liability is particularly important for companies with staffing agency workers because it is not always clear whether an employment relationship exists between the company and the staffing agency workers. To fully appreciate the complexity of the issue, companies must be able to properly classify staffing agency workers as either leased workers or temporary workers.

Leased Versus Temporary Workers Compensation

The definitions for leased and temporary workers vary from state to state, so an adequate classification of staffing agency workers requires a solid understanding of state and local requirements.

For CGL purposes, a leased worker is an individual leased to a client company by a labor leasing firm under an agreement between the company and the labor leasing firm to perform duties related to the conduct of the company’s business. The leased worker category does not include temporary workers. Under this definition, leased workers are considered employees of the client company and are, therefore, excluded from the client company’s CGL.

CGL policies define a temporary worker as an individual furnished to a client company to substitute for a permanent employee who is on leave or to meet the company’s seasonal or short-term workload conditions. Temporary workers are considered employees of the staffing agency and are covered by the staffing agency’s workers’ compensation policy and could be covered by the client company’s CGL.

The Coverage Gap

An insurance coverage gap exists when a leased employee is injured while in the client company’s employ. Leased employees are considered to be employees of the client company for CGL purposes, but they may not necessarily qualify as employees under applicable workers’ compensation regulations.

This results in employing individuals who could sue the client company for negligence (because they are not limited by applicable workers’ compensation provisions). A company with no CGL coverage must pay any court-ordered damages (because CGL coverage does not apply to the company’s employees).

Further it’s important to beware that many commercial general liability policies; especially construction general liability policies specifically exclude temporary or leased workers  further exacerbating the commercial general liability coverage gap.

Solutions to the Coverage Gap

To bridge the gap created by leased workers and or temporary workers companies can look at shifting work-related injury liability to the staffing agency through an alternate employer endorsement or an extension of their CGL coverage to injury to leased workers.

  • Alternate Employer Endorsement

Client companies can negotiate with staffing agencies to include an alternate employer endorsement on the staffing agency’s workers’ compensation and employer liability policies. This endorsement protects the client company, providing coverage to the client company in the case of a tort action and by giving the client company all the workers’ compensation coverage the staffing agency enjoys.

  1.   Coverage for Injury to Leased Workers

This endorsement can be added to the client company’s CGL policy by changing the language that excludes leased workers and temporary coverage from CGL coverage. However, companies should recognize that insurance carriers will disfavor this solution as it effectively removes an exception they intentionally built into the CGL policy.

Lastly and most importantly it’s imperative that you speak with a Risk Advisor and lay out exactly what your plan is and why. Insurance is always a trailer and never a leader. Your insurance program should be designed to how you are effectively executing your business. If this is not properly communicated to your agent or broker chances are your current insurance program will fail when a claim occurs. If when you communicate your business plan to your broker the response you get back doesn’t bring clarity to a level of comfort that they understand this nuance it may be time to select a Risk Advisor instead of your current brokerage relationship.

Construction Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Is Your Construction Company Missing Your CPAP Workers Compensation Insurance Premium Credit

If you are a construction company that purchases workers compensation insurance make sure you are receiving the CPAP workers compensation insurance premium credit. The Contracting Classification Premium Adjustment Program (CPAP) is a discount program that can reduce the amount that an a construction company pays in workers compensation insurance premiums. It was designed to help offset the higher workers compensation costs for union based shops who pay a higher wage rate. If your construction company buys workers comp insurance in NY and pays NY workers comp rates you must look into obtaining the CPAP credit. It could lower your NY workers compensation rates for your construction company by over 10% a year. CLICK HERE to have us review your workers comp policy to see if your construction company qualifies. 

How does the CPAP Workers Compensation Insurance Premium Credit work?  

CPAP Workers Compensation Insurance Premium Credit

The CPAP was developed to provide a premium credit for employers in the contracting and construction industry who pay their employees higher than average wages. The CPAP discount is calculated using the hourly rate of employees who are classified within the construction industry’s contracting class codes.

The system that is used to calculate workers’ compensation premiums groups employees according to risk-based classifications. For each classification, the employer must pay a certain amount of workers’ compensation premiums based on every $100 of payroll. Since high wages amount to higher workers’ compensation premiums, employers use the CPAP. The goal is to lower their premiums to an amount more level with what they would be paying if they paid their employees less. Think Union shops versus open shops. With the CPAP, employers aren’t penalized for paying their employees higher than average wages.

How does an employer apply for the CPAP Workers Compensation Insurance Premium Credit?

An employer must complete the CPAP application and return it to either the NYS Workers Compensation Rating Board or the National Council on Compensation Insurance (NCCI) if they are a multi-state operation within 180 days from either the effective date or the anniversary rating date of the workers’ compensation policy. The CPAP form MUST be completed every year as this is a use it or lose it proposition. Most construction companies do not have a process in place to reapply every year. especially if they use a pay as you go program as they automation makes them fall asleep at the wheel. 

When completing the application, the employer must determine which calendar quarter data to use.; in NY it’s always Q3.  The employer will also be asked to provide a description of operations or its classification, the appropriate classification code, the total wages paid and the total hours worked.            

Once the application is received by the NYS Workers Compensation Rating Board or  NCCI, the average hourly wage will be computed and the CPAP credit will be generated according to the rules for the state in which the application is being made. The insurance company will then be notified, and the credit will be applied to the policy.

In which states is the CPAP Workers Comp Premium Credit Available?

The CPAP is not a national program. Each participating state has its own rules, which include qualification and calculation of credits. Some states may also have an hourly pay rate threshold for entry into this program.

To see if the CPAP is available for your business, consult with Metropolitan Risk Advisory. For more information about the CPAP program and the potential to lower your workers’ compensation premiums by CLICKING HERE.  You can also call (914) 357-8444 today!

Claims Management, Construction Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Why You Need Claims Management on OCIP Workers Compensation Claims

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CCIP or OCIP Workers Compensation claims can cost you a lot.

Contractor Controlled Insurance Program (CCIP) and Owner Controlled Insurance Program (OCIP) are insurance programs that are designed to “wrap up” most, if not all, all of the insurance needs for a project and generally include general liability insurance, workers compensation insurance, builder’s risk insurance and excess or umbrella insurance coverage as well.  The owner or general contractor of the OCIP / CCIP purchases workers compensation for all enrolled contractors; relieving them the responsibility of purchasing and providing coverage on the sub contractors workers compensation policy.  The insurance company issues a “master” policy to the OCIP / CCIP owner. Each individual sub contractor is assigned an individual policy number. Think of it like a mother with children.  The “mother” has the master policy and all of the “children” or sub-contractors, have an individual policy number.

When claims arise, somebody sends the individual contractor’s policy a code. This allows the loss experience to follow the contractor, not the OCIP / CCIP owner. Claims occurring on an OCIP/CCIP project will impact your EMR the same way as claims occurring on non-OCIP work.  For this reason, you still need claims management on these claims.

For those who don’t understand the impact of the EMR:

Assigned to your company is an EMR stands for Experience Modification Rating. This tells the state, potential clients, and the insurance carriers how well you are managing your employee injuries. The higher the integer (factor) the worse your workers compensation claims and employee injuries are. Although the OCIP/CCIP provides the workers compensation coverage, these claim statistics follow your individual company irrespective of who actually pays for the loss. Further, the EMR facotr predicates your credits or surcharges on your own workers compensation policy. This EMR factor increases or reduces your insurance costs. 

OCIP owner’s insurance company or third-party administrator manages workers’ compensation claims arising out of an OCIP project.

The claim handler gives primary consideration to the OCIP owner and ignores the fact that the individual contractor is also an insured.  For this reason we strongly recommend contractors continue to apply their own internal BEST PRACTICE reporting procedures so they can track and maintain their own records internally as these employee injury claims will still impact your organization.   Best practice claims procedures were designed to ensure critical information is gathered early on and documented which allows the claims to settle faster and a much lower payout. The longer the delay in reporting the claim, the higher the payout. The payout can increase as high as 40% or more.   

By managing claims in a similar way we encourage them to be, this will lessen the financial impact on both the employee and the business. We encourage you to have a point person within your organization who is tasked with closing out every open claim if you are not doing so already.

 
An action plan should associate with each employee injury claim to be complete. Insurance marketplaces frown upon open claims when you bring your account out to market for price quotes. Further, they impact your EMR adversely as well.

Reporting, monitoring, and closing out all of your employee injury claims.

These are key takeaways respective of OCIP / CCIP programs your company may be enrolled in.

This is irrespective of who is actually writing the claims check. The worker’s comp claims report to the Wrap administrator and will follow your company in the form of the EMR. Your state’s workers’ compensation rating board or the NCCI (National Council of Compensation Insurance) gives you this.

This drives the ultimate cost of your worker’s compensation insurance premiums in the form of either surcharges or credits. If your EMR exceeds 1.2 you may not be eligible to bid on certain federal contracts which has an “opportunity cost.” Some General Contractors may set a maximum allowable EMR of 1.0.  No sub-contractor with above a 1.0 can bid on future work with that GC.

CLICK HERE to download our FREE GUIDE.

You keep building, we will keep helping you manage your risk so you can win future work.

 

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Workers Compensation Insurance, Workers Compensation Premium Audits

NYSIF WC audit with Out of State Payrolls

NYSIF WC audit with out of state payrolls

Workers Compensation audits with the New York State Insurance Fund can often be complicated and stressful undertakings. Some of the potential

Contact a Risk Advisor to discuss you NYSIF WC audit with out of state payrolls.

issues employers may face are weekly payroll limitations, the use of independent contractors & subcontractors, and wrap ups. Another issue that can often go overlooked and prove to be just as costly is how to address WC audits with out of state payrolls.

The general belief is that the State Fund does not cover out of state injuries. As such, New York employers insured with the Fund will take one of two routes to address the prospect of out of state work:

1. Do not take out of state work. This is by far the simplest method to avoid issues at audit. However, this is not always practical as employers can be missing out on profitable work.
2. Purchase a Work Comp policy to cover the out of state work. This will allow employers to pursue the out of state work and ensure there is proper coverage for their employees.

Purchasing a policy to cover the out of state work seems simple enough but what happens at audit? As employers will now have to deal with two Workers Comp audits great care needs to be taken when documenting the out of state payroll to avoid being charged twice. Employers erroneously believe the simple fact of having another policy is all they need to ensure the out of state work is not picked up by the NYSIF at audit. This is far from the truth.

You may be thinking to yourself how can the State Fund charge for out of state payroll especially there is another policy specifically in place to cover it? It all comes down to the jurisdiction for any potential employee injury claims. There are several factors that can determine where an employee can file for workers comp benefits. Three of those factors are where the employee worked, where they were paid, and where they lived. Depending on the circumstances even though an employee can sustain an injury on an out of state jobsite, they may still be able to file their claim in New York with the State Fund.  As such, the State Fund will attempt to collect premium on the out of state payroll in order to cover these potential claims.

What can be done to avoid this?

Depending on your particular situation steps can be taken to mitigate possibly nullify The New York State Fund’s ability to charge for out of state payrolls.

0. Purchase a Workers Comp policy to cover the out of state work. Step 0? While this was addressed above allows another insurer to fund the risk of potential claims it does not reduce the State Fund’s ability to charge for the out of state payroll in of itself. It only sets the ground work without which there would be little to no possibility to reduce your out of state payroll burden with the State Fund.
1. Clearly document what payroll was earned in-state and what was paid on out of state jobs. Being able to show what payroll was earned where will aid the auditor in determining what should be included in audit. As with point 1, this will likely not be sufficient on its own.
2. File and pay taxes on the payroll earned out of state with that state. The first thing any NYSIF auditor will do is review your quarterly NYS-45 payroll tax forms. Any payroll on the NYS-45 forms could be deemed to have been earned in New York and as such could get picked up at audit. Filing payroll taxes in another state for the payroll earned in that state can be burdensome on both the employer via added administrative costs but also employees as they will now have to file a second state income tax return. Employers should investigate the pros and cons to determine if the cost benefit is worth the added complexity.
3. Use out of state employees. If an employee both lives and works outside of New York State, there is little possibility the State Fund will pick them up at audit. This is especially true if this step is used in conjunction with step 2. For simplicity, (smaller) employers may incorrectly include their employees living and working out of state as part of their New York payroll.

While the steps outline can seem daunting and possibly overwhelming, they do work. By applying these steps we recently help a client save nearly $140,000 on a workers compensation audit with the State Fund.

Contact a Risk Advisor today by CLICKING HERE to see how Metropolitan Risk can assist you in navigating the quagmire of your NYSIF Workers Comp audit with out of state payrolls.

Workers Compensation Insurance, Workers Compensation Premium Audits

Workers Compensation Carriers Are Misclassifying Employees of On-Line Retailers and Wholesalers

Workers Compensation Carriers Are Misclassifying Employees Of On-Line Retailers and Wholesalers

One area we see a lot of errors is the proper classification of employees of On Line Retailers and On Line Wholesalers during a workers compensation audit from insurance carriers like the New York State Insurance Fund.  Within these businesses most  have no retail store presence but have a robust mail order, on-line retail footprint selling their goods and service, their employees are getting misclassified during workers compensation audits generating large, incorrect bills for the on-line retailer or on-line wholesaler.

You see it every day how much the world has changed. The world’s largest retailer has no stores ; Amazon. The world’s largest hospitality company doesn’t own one hotel room AirBnB. The world’s largest livery business owns no cabs or limos ; Uber. Our legacy systems are having a difficult time sorting and organizing all these changes because they are happening so fast. This is especially true of our worker’s compensation system which struggles with properly classifying all the new jobs and businesses that have evolved over the last ten years.

Incorrect Versus Correct Workers Compensation Premium Audits

As an example,  we were recently retained by a small artisan craft business that designs their own pillows using a computer. They ship their designs overseas where the items are manufactured. They are shipped to New York fully completed and assembled and are packaged in tissue paper, labels and special packaging where they are shipped to the end user who found and purchase their product on-line.

The insurance carrier upon audit determined that this small business was a manufacturer and charged them a manufacturing rate for their employees which took their insurance premium from $2,500 a year to $25,000 a year which was hardship to say the least for this small business. We took the file on as we felt the injustice for this particular business was too much for us to take as they had nowhere to turn as most brokers and agents don’t have the capability to successfully protest an incorrect workers compensation premium audit.

In 10 minutes we found the correct worker’s compensation classification code for this business which essentially is described like this:

Operations Covered: “This classification applies to stores which are principally engaged in the wholesale selling of merchandise not described by any other specialty wholesale store classification. Stores principally engaged in the wholesale or retail mail order sales of merchandise such as the merchandise described above are also included in this classification.

Other types of operations assigned to this classification are:

Packing – receiving bulk merchandise for re-packaging.

This is the appropriate worker’s compensation classification code for this and most On-Line Retailers and On-Line Wholesalers. Naturally, there are some caveats to this contingent on exactly what you do, and what your workflow and processes are.

One mistake this particular business owner did was try to solve for their worker’s compensation premium audit challenge on their own which ultimately dug the hole deeper. We recommend that you speak with a workers compensation audit expert that knows the worker’s compensation system and the appropriate state rules that govern the audit process. The insurance carriers know you are at a disadvantage and most agents and brokers do not have the internal capabilities to successfully challenge the carriers or the states workers compensation rating board. To be successful in your worker’s compensation premium audit protest it’s important to understand the rules FIRST before you start answering their questions as one misstep can doom your entire argument.

If you have been audited by your worker’s compensation or general liability insurance carrier and you feel they have taken an adverse position that is generating significant insurance premiums simply make a simple call to an EXPERT. Most will give you a no-commitment consultation to at least guide you and give you a sense of their overall mastery of your particular issue.

Lastly, we strongly dissuade you from signing contingency contracts whereby you are obligated to pay them 40 to 50% of their “recovery”.Often we charge a flat rate based on how much time we think it will take to collar the carrier. It’s your money, their error! Why pay a firm half of someone else’s error which is probably not pocket change.

We hope you found this article informative and helpful . IF you wish to speak to a Risk Advisor please call (914) 357-8444 or simply CLICK HERE.

 

 

 

 

 

Construction Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

Workers Compensation Audits and Independent Contractors

Workers Compensation Audits and Independent Contractors

One of life’s many non productive responsibilities is managing your annual workers compensation audits and Independent Contractors. Whats worse is pulling together all that information only to be back charged. You may have paid for vendors and sub contractors but didn’t collect a workers compensation certificate. This article deals specifically towards sole proprietors with no direct employees. This may relate to your workers compensation premiums and audits.

Sole Proprietors

We chose this one type because they can be tricky, especially if your insurance carrier is the NY State Insurance Fund or NYSIF.

The Workers Compensation Law states that sole proprietors with no employees are not obligated to carry workers compensation insurance.

This applies in many states including New York. Thus, in effect sole proprietors can opt out and self insure. That creates a problem for companies that hire them as the lack of proof of coverage creates an audit exposure. If you are unable to prove the vendor or independent sub contractor did have coverage, the payments your company makes to this sole proprietor will be picked up on your workers compensation audit. This will become a chargeable event under your policy. This is one of the many ways the workers compensation system can be problematic if you are not tight in your process and procedures. The result is the carriers can charge you for those companies, driving up your insurance costs. Additionally, should you hire a sole proprietor or other vendor/sub contractor that does not have Worker Compensation insurance, your policy could be liable for any job-related injuries they sustain.

We suggest two options for handling independent contractors in a workers comp audit:

  • Disregarding what the State allows in terms of who can forego the purchase of a workers compensation policy you have the right to obligate EVERY vendor, sub contractor, and independent contractor to carry both workers compensation AND statutory disability insurance. This is your most cost effective risk management strategy.
  • If you must hire this person / company and they cannot provide proof of Workers Compensation insurance, you may still be charged at audit. It is possible to mitigate the chances an injury will be picked up by your policy. To do this we suggest a waiver be created, signed and executed.

This waiver should simply state the following: 

  1. The name of the Sole Proprietorship (including D.B.A.) address and phone on letterhead.
  2. A simple statement that reads the Sole Proprietorship understands they are responsible for their own workers compensation and statutory disability coverage and cannot look to (your company) for coverage. It was their choice to forgo the purchase of an actual policy which would have provided them coverage regardless of the state allowing sole proprietors to refuse the purchase of a policy.
  3. That they have no direct employees other than the signatory on this letterhead.
  4. Should they hire employees they must notify you of such in writing and provide a Certificate of Insurance evidencing proof of workers compensation coverage and statutory disability coverage.
  5. They are not allowed to hire subcontractors without your written authorization. Subcontractors who are sole proprietors must provide same Acknowledgement letter, or provide a Certificate of Insurance proving they do in fact have coverage.

The letter sets a standard of care and expectation in the event that the Sole Proprietor looks to your workers compensation policy for coverage for their injury. This letter will provide defense and allow your workers compensation broker to controvert the workers compensation claim. If you have the waiver signed, the carrier will still charge you on your audit.

Make sure you bake the cost of the contract down between labor and materials. Only the labor component of the contract is chargeable with respect to the workers compensation audit.

Don’t start from scratch! Below is a draft copy of such a letter as an example. Before you place our “Draft” letter in production we suggest you swing it past your attorney for their approval. Further we suggest you click here to download our Guide to NY State Workers Compensation Statutes.             

Last point

We highly recommend someone in your office confirm that workers compensation coverage is in truly in effect. There are a lot of fake certificates of insurance on the street. Someone in accounting or bookkeeping should verify coverage before payments are dispersed. There should be a mechanism in your contracts that allow retainage in the event coverage is found to have lapsed, or worse, was not in effect at all. To do this simply CLICK HERE to verify if the Employer has workers compensation coverage in NY. For other states simply contact a Risk Advisor by clicking here and we will research for you.

Solid risk management saves a lot of time and money. This is but one example of how through proper process and protocol you can better lower your cost structure. Metropolitan Risk’s goal is to make our clients cost efficient/cost consistent to earn higher profits and grow market share. If you have further questions contact us directly at (914) 357-8444.