The Workers Compensation Insurance Market Can Be Cruel
The workers compensation insurance market can be a really cruel beast. Take for example a client of ours with a pretty sizable payroll (and big premium account) whose workers compensation insurance policy is renewing this month. They hadn’t sustained a work related injury in almost ten years which is a feat in itself considering the risky work they do as seismic retrofitters of unreinforced buildings.
After almost ten years with a clean workers compensation loss history, this client experienced two unexpected employee injuries this year with over $100,000 in claims paid for injuries and disability. This $100k is only a fraction of the premium this client has paid for their workers compensation insurance over the last ten years. However, the current carrier is non-renewing their policy and most other carriers are declining to quote. Funny thing is, these same carriers were begging for a chance to write their renewal in years past. In either case, this is how the workers compensation insurance market works sometimes as harsh as it can be.
Although it’s impossible to completely eliminate employee injuries, there are steps you can take as an employer to help minimize the frequency and severity of injuries:
7 Steps To Manage Workers Compensation Costs
1. Hire responsibly. Employers should take time to find the right employees for the workplace and use tools like employment applications, reference checks, pre-hire drug screens, motor vehicle driving history and background checks.
2. Establish a safety program. Develop policies, procedures and rules. Provide employees with the necessary training, proper tools and personal protective equipment to do their job safely.
3. Enforce safety rules. It is not enough to train employees and provide them with the proper tools. Businesses should routinely remind employees to work safely through the use of workplace audits, safety meetings, toolbox talks and annual training.
4. Provide immediate medical care. Pre-arrange medical facilities for employees in the event of a workplace injury. Be prepared to provide transportation for nonemergency injuries. For emergencies, call 911. Always require a post-accident drug test to be administered.
5. Report all injuries immediately. All injuries should be reported to the insurance carrier within 24 hours of the incident. Ongoing communication with the injured employee and the claims adjuster is extremely important in order to better manage the claim.
6. Investigate all accidents and near misses. Businesses should review accidents to assess what happened and take necessary steps to make sure it does not occur again.
7. Provide transitional modified jobs. Once an employee is released to return to work, businesses should be prepared to offer alternate duty if the employee is not currently able to perform duties required by their position.
These steps don’t have to be taken alone. Talk to your broker or carrier about the resources available to help your business mitigate risk.
–JK
What If I Have Trouble Finding Insurance for My Business?
In most cases businesses can obtain insurance in the standard insurance market with the help of a licensed and qualified insurance broker. However, if your business has experienced significant losses, your business is considered to be engaged in high-risk operations (with a greater chance of claims frequency or severity), or you have recently started your business, you may not be able to locate insurance in the standard commercial insurance market. You do have options, however, in securing commercial insurance elsewhere.
Surplus Lines Insurance
When an insurance broker is marketing your insurance coverage and has had applications declined from three licensed commercial insurance carriers, they can proceed to obtain insurance from the “surplus lines market.” Sometimes referred to as the “non-admitted” market, surplus line companies offer insurance to businesses that cannot obtain insurance in the standard insurance market. While these companies are not licensed by the California Department of Insurance (CDI), they do have to go through an approval process that includes providing evidence of minimum capital and other strict requirements. When these requirements have been met to the CDI’s satisfaction, the CDI may approve the company to conduct business in California and add them to the List of Approved Surplus Line Insurers.
A surplus line company can only be accessed through a specially licensed broker, also referred to as a wholesaler. The broker must have a surplus line license issued by the CDI in order to sell surplus line insurance. Before purchasing insurance from a surplus line insurance company, your insurance broker must provide you with a disclosure that the insurance you are buying is being issued from a surplus line company.
Although surplus line insurers must follow the Fair Claims Settlement Practices Regulations (regulations that govern how insurers handle claims), the CDI has limited jurisdiction over the operation of surplus line insurers. If the carrier becomes insolvent (goes bankrupt), your only course of action will be through the courts. The California Insurance Guarantee Association (CIGA), which protects claims with admitted insurers, does not apply to surplus line insurers. All insurance brokers should be able to supply information on the financial solvency of any surplus line company that it represents. There are independent rating organizations that analyze insurance company solvency such as A.M. Best Company.
Most states identify the standard lines insurance companies as “admitted,” “licensed” or “standard” and the excess and surplus lines insurance companies as “non-admitted,” “unlicensed” or “non-standard.” However, these terms tend to reflect a negative connotation in regards to the strength and security of a surplus lines insurer. The fact of the matter is, most states require surplus lines insurance companies to maintain higher minimum capital levels than they require admitted markets to carry. Just because a carrier isn’t licensed or admitted in the state of CA, don’t assume they’re inferior. Plenty of established businesses secure their insurance coverage through the surplus lines insurance market.
It’s safe to assume a ladder manufacturer secures their insurance from a surplus lines insurance carrier:
–JK
Text Messaging Guy Almost Runs Into A Bear
We talk about text messaging while driving, what about text messaging while walking?? This guy BEARly got away from this one. You think he was updating Facebook….”wheres this bear everyone been spotting?”
Keep your eyes open and pay attention to what you’re doing people! Not only while you’re driving either.
–JK
Hail Damage Photo – McAllen, TX
Take a look at this incredible shot of some hail damage at a Starbucks store that occurred in McAllen Texas last night. This picture came from the National Weather Association.
Windstorm or hail damage is a covered cause of loss on a property insurance policy. Here in California, I can’t imagine ever seeing hail as severe as this, but the picture was incredible enough to share.
–JK
Do I Include Tips In My Payroll For Workers Compensation Insurance?
Man, I haven’t posted anything new for way too long, mostly because I have been devoting a lot of time to studying for my next CPCU test…..”Accounting and Finance for Insurance Professionals.” Does anything sound more dry and boring than that?? Accounting/finance/insurance…….sounds worse than influenza/ the DMV/ or paying bills. Oh well, I am learning a lot.
Anyways, someone asked me a good question today. This came from a salon owner, “Do I include tips in my payroll estimate (for workers compensation insurance)? The answer to this question is NO, do not include tips. Tips and severance pay are to be disregarded in developing payroll with one exception: sums for accrued vacations, sick pay, commissions, and bonuses included in severance pay shall be included.
One the same note, with regards to overtime, only straight time is used in the premium calculation for workers compensation insurance. In other words, all hours worked are considered but only at straight-time rates. Premium rates for pay of overtime are disregarded. However, payroll records must be kept which show these details.
Bonuses are considered as regular compensation and used in developing payrolls.
Premium pay for working certain hours on the clock, such as swing shift or night shift work, is used in developing payrolls.
–JK
Source: Merritt Manual
Drunk Beer Pong Guy Tries To Sue Bar After Getting Hit By Car
Add this one to the list of frivolous lawsuits, a New Jersey man filed a lawsuit against at New York bar called Wicked Willy’s over injuries he suffered following a 3 1/2 beer pong game. The man was struck by a car going 50-mph while trying to cross a highway in New Jersey after leaving the bar.
According to the man’s lawyer, he suffered numerous injuries, including a broken hip, leg and foot, tears in both his knees, and a lacerated liver. When the man’s blood was checked at the hospital four hours after the accident, his blood alcohol content was .26, which is almost four times higher than the legal driving limit.
The man claimed the bar should have been monitoring the game to make sure players weren’t getting visibly drunk, however, a New York judge has thrown out the lawsuit against the pub. The judge ruled the man voluntarily signed up for the beer-drinking game and couldn’t sue Wicked Willy as a result. The judge said the man “consumed alcohol to the point of diminished capacity.”
The New York Post says his lawyer will ask the judge to reconsider the ruling.
This is a reminder that if you sell or serve liquor in any capacity, you need to carry liquor liability coverage, not only for legitimate lawsuits, but for frivolous claims which may need to be defended in the court of law. Hiring attorney’s isn’t cheap.
For more details on the story, see this article from the New York Post
–JK
1985 Product Liability Insurance
I’ve been in the insurance industry just short of five years now helping business owners with their insurance needs. If I could turn back the clock 27 years, it would be a dream for me to write product liability insurance for this awesome product, the music vest. Treat your eyes to this gem:
–JK
Large California Traffic Ticket Fines Effective 01/06/2012
If you’re a California driver, pay close attention to this one. The Golden State of California is broke and is looking for ways to pay some bills. Aside from raising taxes like our brilliant politicians up in Sacramento like to do as a “solution” to all our fiscal problems, they looking to the highways to generate some revenue for their pockets.
Take note of the following California traffic ticket fines which took effect on Friday, 1/6. Sorry, I’m a few days late on this. I received this information from an email. Apparently, these details were taken from an article in the L.A. Times. I tried to find it but no luck. If you come across the story, please send to me so I can give some credit to where it’s due.
Rumor has it that the California Highway Patrol is under pressure to issue a lot more tickets than last year with at least 30% increase in fines over 2009, so beware of radar guns, highway and traffic cameras installed everywhere and the tougher enforcement of parking rules.
Traffic Ticket Fines (Effective 01/06/2012)
- VC 12814.6 $214 Failure to obey license provisions
- VC 14600(A) $214 Failure to notify DMV of address change within 10 days Note: The fine may be reduced with valid proof of correction.
- VC 16028(A) $796 Failure to provide evidence of financial responsibility (insurance) Note: This fine may be reduced with proof of insurance on or after the violation date.
- VC 21453(A) $436 Failure to stop at a red signal.
- VC 22349 $214 Unsafe speed, 1 to 15 miles over the limit.
- VC 22350 $328 Unsafe speed, 16 to 25 miles over the limit.
- VC 22450 $214 Failure to stop at a stop sign.
- VC 22454(A) $616 Passing a school bus with flashing red signals.
- VC 23123(A) $148 Driving while using a wireless phone not hands free, first offense.
- VC 23123(B) $256 Driving while using a wireless phone not hands not free, each subsequent offense.
- VC 23123.5 $148 Driving while using a wireless device to send, read or write text.
- VC 23124 $148 Minor driving while using a wireless phone.
- VC 22500 $976 Parking in a bus loading area.
- VC 22507(A) $976 Violation of disabled parking provisions, first offense.
- VC 22507(B) $1876 Violation of disabled parking provisions, second offense.
- VC 26708 $178 Unlawful material on vehicle windows.
- VC 27150 $178 Adequate muffler required.
- VC 27315 $148 Mandatory use of seat belts.
- VC 27360 $436 Mandatory use of passenger child restraints. Note: This fine may be reduced by completing a court authorized child seat diversion program.
- VC 27400 $178 Headsets or Earplugs covering both ears.
- VC 27803 $178 Violation of motorcycle safety helmet requirements.
- VC 34506 $616 Commercial Driver – Log book violation.
- VC 4000 $256 No evidence of current registration. Note: The fine may be reduced with valid proof of correction.
- VC 4159 $178 Notify DMV of change of address within 10 days. Note: The fine may be reduced with valid proof of correction.
- VC 5200 $178 Proper display of license plates. Note: The fine may be reduced with valid proof of correction.
- VC 9400 $178 Commercial weight fees due. Note: The fine may be reduced with valid proof of correction
So what do you think? Will these California traffic ticket fines convince you to be more cautious on the road?
My Business Will Be Closed For Termite Fumigation. Am I Covered By My Insurance?
I received an interesting call this week from a client with a really unique question, definitely the first I had ever been asked this one: “My business will be closed for three days for termite fumigation, am I covered by my business insurance?”
Not a bad question actually.
This insured is a local hair salon which is located in a four-story building where the ground floor consists of retail shops and the upper floors are all residential condominiums. The building needs to undergo termite tenting and the business on the ground floor will be forced to close their doors for three days. There are three businesses total, but one of them is a restaurant and the homeowners association can only afford to pay one days worth of income for the restaurant, and the restaurant only.
What about the other two days and the other two business tenants??
This is when my client called to ask if his policy would provide such coverage.
The answer to this question is unfortunately, no. There is no business income/interruption coverage provided by a property insurance policy. The tenting of the building for termite fumigation purposes is not a covered cause of loss. Not to say that there are no carriers out there who offer some kind of special endorsement for something like this, but it’s very unlikely. I am not aware of any myself and even ran it by the carrier underwriter to be certain.
However this homeowners association decides to handle it has yet to be determined, but insurance isn’t the solution to the business closures in this scenario.
–JK
2011 Blog In Review
The WordPress.com stats helper monkeys prepared a 2011 annual report for this blog.
Here’s an excerpt:
A New York City subway train holds 1,200 people. This blog was viewed about 7,000 times in 2011. If it were a NYC subway train, it would take about 6 trips to carry that many people.
About Me
I grew up in Fullerton, CA and graduated from Servite High School in Anaheim. I have my Bachelors degree from Loyola Marymount University in Los Angeles. I currently live in Tustin, CA.
Please contact me if you need help with any of the following lines of insurance for your business:
-Businessowners
-Property
-Commercial General Liability
-Product Liability
-Workers Compensation
-Group Medical
-Commercial Auto
-Umbrella/Excess Liability
-Errors & Omissions/ Professional Liability
-Employment Practices Liability
-Directors & Officers
-Life & Disability Insurance
Jimmy Kinmartin, CPCU 