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Many employers have come to the realization that excess workers compensation coverage is a product designed to meet the needs of companies that self-insure their predictable losses, yet are still interested in purchasing insurance for major exposures, such as injuries which are life-threatening or fatalities. Everyone who understands their financial exposures in their current programs will likely seek to add this valuable additional coverage in order to lower their risk potential. What’s more, when an employer tries to purchase a traditional workers’ compensation policy and is denied by private insurers, they may be eligible for an assigned risk plan administered by the National Council on Compensation Insurance (NCCI). In order to qualify as a self-insured employer, a business must meet the following criteria: Have a tangible net worth of at least $2.5 million Post security of $100,000 (or 105% of the employer’s expected annual incurred cost of claims, whichever is greater) Carry excess workers’ compensation insurance Must show that the business has administrative resources that will enable it to administer and settle all claims Because the exposure to workers’ comp claim costs vary by employment classification, accurate classification of employment categories is important. Placement in the correct classification will ensure that businesses receive proper rates that are in line with the particular type of exposure. For a fee, NCCI can also provide a formal review of the applicable classifications. Keep detailed records as to the specific work done by the employee for a particular job where classifications allow for the division of payroll, such as construction classifications. Businesses may be audited for a variety of reasons Insurers and the Division of Industrial Relations have the right to audit employers pursuant to state law. Whether and how often a business is audited will depend on the nature of the business, the size of the business and whether there are any suspected problems, therefore do not misrepresent the nature of the business, fail to disclose material changes to operations, or underestimate payroll. Any businesses using subcontractors should have subcontractor certificates on file and should never use uninsured subcontractors. In any event, do not misclassify employees as independent contractors. Employers that want to dispute the findings of an audit should first attempt to resolve their dispute informally with help from their agent. Employers can also discuss issues with a NCCI representative or with a Division of Insurance Consumer Services Representative. As a final resort, a request for an appeal can be filed with the Insurance Commissioner, and presented before the Appeals Panel for Industrial Insurance by way of a hearing.
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