Entries Tagged 'Workers’ Compensation' ↓
General Liability, Workers' Compensation
I have been in the insurance industry for longer than I care to say, and there are numerous myths that seem to endure over time. In an attempt to put these myths to rest I will be be discussing some of the more “common” ones in a series of blogs.
The fact is that this is more complicated than it seems at first glance. For purposes of determining the employee count, most state laws also count uncompensated officers as well as employees of sucontractors. In addition, state laws count the total number of employees during an entire year, and not the average number of employees at any given time.
If an employer is required to carry Workers’ Compensation but does not do so, the injured worker can file his Workers’ Compensation claim with the state’s Uninsured Employer’s Fund and will get paid the traditional benefits. The state’s Uninsured Employer’s Fund will then file a lien against the non-complying employer for the amount of the payout and can levy substantial fines against the employer in addition to the benefits.
After I tell my client this, their next response is sometimes “Can’t I file the claim under my General Liability policy?”. The answer to this is very simple – “No”, as these types of claims are excluded.
Audit, General Liability, Workers' Compensation
I was talking to a new business prospect the other day (I’ll call him Steve), gathering information to quote the insurance for his residential construction business. When I asked Steve about his employee payroll and any amounts paid to uninsured subcontractors, he stated that he wanted to underestimate them so he wouldn’t have to pay so much money upfront. After all, the economy is rough and he thought he might be better equipped financially to pay the additional premiums after the audits had been completed.
This thought process is more common than you might think, and it is extremely dangerous! During my years in the insurance industry I’ve seen way too many businesses go bankrupt because of underestimating their payrolls and gross sales.
The reality is that additional premiums resulting from an audit are due within 30 days and can NOT be financed. If you can’t pay the audit additional premiums when due the insurance company will cancel your current policies. Once your policies are canceled, along with any certificates of insurance that may have been issued, your business comes to a halt. No insurance = no certificates; no certificates = no jobs. In addition, the insurance company will turn the unpaid debt over to a collection agency, which will impact your credit score.
The next thing I usually hear when I explain this is: “Well, I’ll just get insurance with another insurance company and/or agent.”
Unfortunately, unpaid audit premiums must be disclosed on the insurance applications, as well as the reason for your prior insurance policies being canceled. Believe me when I tell you that no insurance company is going to write a policy for you if you owe another insurance company money. Their reasoning is that you didn’t pay the other company, so you probably won’t pay them either. If you don’t disclose the information on the applications then you have committed fraud, which is a blog topic all in itself.
In conclusion, the best course of action is to be as accurate as possible when estimating employee payrolls and subcontractor costs to minimize large audit additional premiums. It’s much easier to spread the premiums out over months than to try and come up with the money in 30 days.
Workers' Compensation
The second most common myth regarding Workers Compensation for the construction industry is “I don’t need to carry Workers Compensation insurance since I only use insured subcontractors and do not have any direct employees”.
Like the other myths I will be discussing, this is not necessarily accurate.
Even if you have a current certificate of insurance on all of your subcontractors showing that they carry Workers Compensation, you are still not adequately protected. In fact, all it means is that at the time the certificate was issued they had insurance in place.
If the subcontractor’s insurance is canceled after the certificate is issued, it is very unlikely you will be notified. Neither the insurance agent nor the insurance company is legally obligated to notify you. The certificate merely states that they will “endeavor to” let you know the coverage is no longer in force. With the current state of the economy, it is becoming more and more common for the subcontractor to obtain insurance in order to have the certificate issued, and then letting the policy cancel for non-payment. The end result is that you will still end up with an uninsured subcontractor desite your efforts.
In conclusion, the best way to protect yourself and your assets is to purchase your own Workers Compensation policy and add the subcontractor classification codes on an “if any” payroll basis.
Court Rulings, Workers' Compensation
“Illegal immigrants injured on the job are entitled to workers’ compensation benefits, the South Carolina Supreme Court has ruled.”
The court ruled that allowing Workers’ Compensation benefits for illegal aliens does not violate federal law (IRCA) and not allowing such benefits would encourage employers to hire illegal aliens to circumvent the need to provide Workers’ Compensation.
Link: National Underwriter News Release
Construction Defect, General Liability, Workers' Compensation
According to a January 14 edition of Insurance Journal Magazine, dramatic increases or decreases in residential and commercial building activity growth could trigger a rise in construction defect or Workers’ Compensation claims.
States that are noted to be in the danger zone for underwriters based on dramatic decreases in contruction activity growth include NJ, KY, LA, FL, and MS.
While the article does not speculate the reasons for such increased losses due to changes in growth, two common reasons are most often cited by other experts. A rapid increase in construction growth is normally associated with an increase in construction defect claims due to an influx of inexperienced contractors in the market. A rapid decrease in construction growth is normally associated with an increase in Workers’ Compensation claims because workers often become disgruntled due to layoffs or cut backs and file Workers’ Compensation claims in retaliation as a way to make up for income loss.
