Recent
Developments in Workers’ Compensation Audits
Workers’
compensation audits are producing a new problem against which agents must
protect themselves. We have labored for
some years now with the “ghost” policy.
While in and of itself, the “ghost” policy is perfectly legitimate. However, some employers trying to get around
the workers’ compensation requirement, can use the
“ghost” policy inappropriately.
Recently,
two incidences have come to our attention where auditors have refused to accept
certificates of insurance as satisfaction of the requirements under NC GS
97-19. Instead, the auditors contended
that the workers were actually employees and the “ghost” policies did not cover
anyone. The insurers believed that they
may be responsible for benefits for workers and insisted on making a premium
charge. Both of these cases resulted in substantial audit premiums and renewal
premium increases. Since agents are not
attorneys, in most cases, and cannot make definitive determinations as to who
is or is not an employee, we think agents should protect themselves by better
documentations of the workers’ compensation transaction.
We have
drafted a sample letter that an agent can use as a guide for a cover letter
that gives a brief summary of worker’s compensation insurance, the audit
process, and the problems and consequences associated with the question about
employment status. A copy of the letter
template is available at the following link:
Workers’
Compensation – Cover Letter
E. Stuart Powell, Jr.,
CPCU, CIC, CLU, ChFC, ARM, AMIM, AAI, ARe
Vice President of
Insurance Operations