Slip sliding away
I am reminded of the Paul Simon song when thinking of Workers Compensation and General Liability audits. I guess I am showing my age. Many of you do not even know who Paul Simon is, let alone this song. Google it. “The nearer your destination, the more you are slip sliding away.”
Everyone works hard to save money up front in negotiating the renewal of your policy rates. Are you losing money at the back end? Here are some very basic auditing rules to help you determine what should be included in an audit…and what should not be included. Please note this may not apply to Captive policies, or policies that are “composite rated”.
What payroll is included on which policies?
Each State has different rules on excluding premium time paid to an employee for Workers Compensation. For example, Pennsylvania requires it to be included in the audit. New Jersey does not include the premium time paid to an employee to be included in the audit. Confirm with your broker what is allowed to be excluded in your State. If you have multi-state operations, be certain you know the rules for each State. General Liability should always exclude premium time.
Business Owners Payroll
In most States, you can elect to exclude this payroll from Workers Compensation as long as you inform the carrier prior to policy inception. Note: If you exclude this payroll, that person is not covered by the policy. That includes medial bills that might arise from an accident. Yes, many business owners will continue to receive income from the business, but the company health plan will not pay for work related injuries. Think long and hard before deciding to exclude this payroll.
Truck Drivers Payroll
If an employee only sole responsibility is driving a truck for delivery of product, their payroll can be excluded for General Liability. The theory being that all their time is behind the wheel, therefore the liability exposure they generate is under the auto (having an auto accident); not the standard “Premises” exposure.
Executive Supervisors
If you have employees that oversee the project managers, they do not have to be classified under the field payroll for Workers Compensation. This will be at a much lower Workers Compensation rate. However, you risk having a general liability classification added that will be several times larger than your current liability rate. This is an issue to discuss in depth with your insurance professional.
Classifications
Another topic to discuss with your insurance professional. There are many different Workers Compensation and General Liability classes. Closely related tasks can generate widely varying rates. You should review the work you perform in detail with your broker to make certain payroll is being assigned to the proper classifications, and not just lumped into the higher rated class. If you are a distributor, please note there are several different General Liability classes that encompass “distributors”.
You work hard to keep rates as low as possible. However, you can give back some of those savings if you are not vigilant at the time of audit.
Robert Manley, CPC, CRIS
Vice President
The Safegard Group
rmanley@safegardgroup.com