A subsidiary of JGS Insurance

(888) 548-2465

Menu

Latest Posts

  1. Workers’ Compensation Audits

    Leave a Comment

    By Meaghan Tyndale-Williams, Vice President – Commercial Lines

    Preparation is Key

    It’s that dreaded time of year again. A month or two after the expiration of your Workers’ Compensation Insurance policy and you are getting calls to schedule your audit. The audit is being requested to determine the amount of premium you owe for the year. Payrolls fluctuate, so the amount used when the policy was first set up is considered your estimated exposure. The payroll estimate comes from you prior to the policy’s inception and is your best projection for the coming year. The purpose of the audit is to determine your actual exposure during the policy period. Since your workers’ compensation premium is determined by your exposures, the audit determines how much you will pay.

    There are two exposures being looked at during the audit. Your payroll and the cost of uninsured contractors. If these exposures are higher than what you originally projected, you will receive a final audit statement. The final audit statement will indicate the amount of additional premium owed in this scenario. If you’re over the projected amount, you will receive a credit on the final audit statement. The billing statement usually comes within three months after the policy expiration and, once received, generally needs to be paid within 30 days.

    Seems simple enough; however, if you are not well informed and prepared, it might not be. So what do you need to do to make sure you are prepared? First, understand what the auditor is looking for. Payroll is primary and payroll also includes payments made to uninsured contractors. For this reason, make sure you have current certificates of insurance on file showing WC coverage for each subcontractor you used during the policy period.

    To verify the payroll, the auditor will most likely request one or all of the following documents:

    Payroll Records to include

    Payroll Journal and Summary
    Federal Tax Reports – 941s that cover the audit period
    State Unemployment Reports and Individual Earnings RecordsAll Overtime Payments Shown Individually

    Employee Records

    Include a detailed explanation of the job duties of each employee<
    Include Number of Employees<
    Hours, Days, or Weeks Worked Annually

    Cash Disbursements showing

    Payments to Subcontractors
    Materials
    Casual Labor

    Certificates of Insurance

    For All Subcontractors
    For All Independent Contractors
    A detailed description of your business operations

    To make the auditor’s and your life go smoothly, have all of the requested documents ready prior to their arrival. A quick audit is a good audit, and a happy auditor usually means a happier insured!

    Overtime is discounted, so to make sure you are not overcharged; itemize all overtime paid to your employees. Break it out per employee per job classification.

    The auditor will ask questions about your operations. To make sure the audit is accurate, the owner of the business or someone else with a very good understanding of the operations should meet with the auditor.

    Keep your answers to their questions simple and do not volunteer information. It’s a good idea to review their work prior to them leaving your office. Review how they classified your employees and make sure you are in agreement. Misclassification of employees can be very costly! If you agree with the auditor, keep a copy for your records.

    Now that the audit is over, expect to get a final audit in the mail. Once you receive this, make sure to review it for accuracy. The most common mistakes are misclassification of employees, a change in the experience modification, charges for subcontractors, policy rate changes, incorrect payroll, or instances where payroll separation are not allowed. If you find any of these things or do not agree with the audit, your insurance broker can help you file a dispute that will put a hold on any collection procedures for the premium in dispute. This needs to be put in writing to your insurance company with a detailed explanation of what is incorrect and what the correct premium should be. You will be asked to pay the undisputed portion of the premium, but ultimately, if your dispute is done correctly, it will save you from overpaying for your insurance.

     

  2. Hurricane Coverage

    Leave a Comment

    By Gwenyth P. Luu, Director – Commercial Lines

    10 Important Issues That Can Impact Coverage

    Hurricane season is rapidly approaching. Anyone who has followed the news over the last few years likely remembers the numerous storms which have caused millions (or billions) of dollars in damages and left wreckage in their wake. Protecting property and business assets is a priority for businesses at risk of suffering damage in these storms, and understanding what insurance to have and what issues affect that insurance coverage is an essential aspect of that protection.

    Here are 10 things which can have an effect on hurricane insurance coverage:

    1) Flood Deductibles – These need to be reviewed in terms of their relationship to the policy as a whole. That is the only way to determine the out-of-pocket exposure a business may face.

    2) Named Storm Deductibles – The language in the policy needs to be fully understood, especially when it comes to named storms. The deductibles often carry wording about percentage deductibles, which can often be confusing and vary wildly from insurer to insurer.

    3) Off-Premise Power Failure – This issue can lead to business interruption but is not always covered in a typical policy. Many policies have exclusionary wording which leaves these types of expenses out of coverage.

    4) Mold, Fungi, and Bacteria Exclusions – Sometimes, simply having moisture in the air is enough to promote mold or bacteria growth. Unfortunately, this type of damage may not be covered if water from the storm did not physically touch the things that were affected. So while a painting may not have been damaged by storm water, it may be destroyed by mold caused by moisture from it.

    5) Wind-Driven Rain – Many policies have exclusions for damage caused by water or rain that is blown into an interior without clear exterior damage from the wind.

    6) Business Interruption and Period of Restoration – The period of restoration begins when the physical loss or damage occurs; it ends when the property, with reasonable speed, is repaired or replaced. There are many challenges that can play a role in the period of restoration, such as delays in rebuilding or repairing, contract or lease issues, change in designs or upgrades and compliance with building codes.

    7) Civil Authority – Prior to potential natural disasters, residents are often asked to evacuate the area. This can lead to business interruption both before and after the event. It is essential to understand exactly how this coverage is triggered and any policy limitations.

    8) Dependent Property or Interdependency Claims – These two are often confused. Dependent property is property owned by others which is depended upon by the insured. Interdependency is when an issue at one insured property affects another insured property.

    9) Repair or Replace – Determining whether a piece of property should be repaired or replaced is not always as easy as it seems to be at first glance.

    10) Contingent Business Interruption – This is meant to cover business interruption when essential suppliers or product chains are cut off to the insured.

    Knowing the limitations of your policy and exactly what is covered is an essential aspect of ensuring adequate protection. The last thing any business wants is to have storm damage occur only to find out that it is not covered due to issues in the policy. To further examine these key issues and challenges, give us a call, we can address them so you can achieve the best coverage solution for your business.