A Lesson in Timely Claims Reporting

file claims

A recent appeals decision denied coverage to a company on its directors and officers (D&O) liability insurance policies for taking too long to file the claim.

In this case, the 5th U.S. Circuit Court of Appeals in New Orleans sided with an insurer that had denied a claim a company had made after being sued for failing to pay overtime wages to nonexempt employees.

The insurance company had denied the claim because the first employees’ claim was made in August 2014, but the company failed to inform the insurer of that and subsequent claims until September 2015.

This case illustrates the importance of filing claims in a timely manner.

When the employer actually got around to filing the claim it had an in-force D&O policy with the insurer, although there was an earlier policy in force when it had received the first claim of failing to pay overtime.

Under the policy in force at the time of the first claim, the insurer would have been obligated to pay all claims made against the company under the policy.

“That earlier policy would have provided coverage except that the insured failed to comply in 2014 with a notice provision. We conclude the district court was correct to rely on this difference,” the three-judge panel in the appellate court wrote in an opinion that upheld a lower court’s ruling.

Timeliness

One of the critical obligations of an insured is the duty to timely report claims or circumstances that may give rise to a claim. Failure to report a claim in accordance with the policy requirements can result in a claim being denied, or worse, having the entire policy voided.

D&O policies are “claims made” policies, meaning that coverage exists only for claims made during the time period the policy is in effect. Claims made while no policy or extended reporting period are in effect are not covered.

Claims-made policies also have retroactive dates. Ideally, the retroactive date is the day the insured started business, but it can also be the day that it first purchased professional liability coverage.

Assuming the retroactive date has not been advanced, the policy in force when a claim is made is the policy that will respond, regardless of when the negligent act, error or omission took place.

However, there is one important qualifier. This insurance applies to claims that took place after the retroactive date, but prior to the end of the policy period, provided that the insured had no knowledge of the claims prior to the effective date shown in the declarations.

In other words, if you knew of a claim prior to the time you renewed your claims-made policy but did not report it, and if a claim is subsequently made, the insurance company can deny coverage. It doesn’t matter whether or not it’s been continuously renewed by one insurance company, the policy excludes it.

This underscores the importance of timely reporting of all claims prior to renewal each year.

New Law Bars Hairstyle Discrimination

woman with curly hair

California Gov. Gavin Newsom has signed legislation that will make it illegal for employers to discriminate against employees and job applicants based on their hairstyle if it is part of their racial makeup.

The law, known as the CROWN Act (Create a Respectful and Open Workplace for Natural Hair),

amends the state Education and Government Code to define race or ethnicity as “inclusive of traits historically associated with race, including, but not limited to hair texture and protective hairstyles like braids, locks and twists.”

This broader definition of race means that natural hair traits fall under the context of racial discrimination in housing, employment and school matters.

The law could apply to anyone, but as legislation it was specifically introduced to stop instances of discrimination against black employees over their natural hairstyles. There have been a number of high-profile incidents over the past few years where employees and students were discriminated against based on their hair:

  • A sixth-grade Louisiana girl was expelled because her hair violated school policy.
  • In October 2018, a wrestling official in New Jersey ordered a black wrestler to cut his dreadlocks if he wanted to compete.
  • An Alabama woman sued her employer for discrimination after the organization had rescinded a promotion to another position because she had dreadlocks.

The new law “protects the right of Black Californians to choose to wear their hair in its natural form, without pressure to conform to Eurocentric norms,” said Sen. Holly Mitchell (D-Los Angeles), who introduced the legislation.

The takeaway

The law means that it will be illegal for employers to discriminate against someone because of their hairstyle if it’s tied to their ethnicity and race. Employees that fall into this category can sue their employer for discrimination based on race under California’s Fair Employment and Housing Act.

You should update your employee handbook to include this definition of race in the employment discrimination section, and also train your managers and supervisors in the change.

Remember, discrimination cases can be costly, even if the employer wins in the end. There are legal fees, costs of witnesses and damage to reputation to contend with.

The best prevention for discrimination is to have rock-solid policies in place. It’s also wise to secure an employment practices liability insurance policy. That’s a smart move for any business, particularly as the number of discrimination cases is on the rise nationwide, alongside higher jury awards for employees.

Is Your Business Prepared for Recreational Marijuana Use?

cannabis marijuana work

Companies in states that have legalized marijuana are wrestling with how to deal with employees that use, particularly if they did so the night before and are still feeling the effects the following day.

A new survey found that one-third of business owners are not prepared for managing the effects of legalized marijuana in the workplace. The biggest issue facing employers is ensuring that workers don’t come to work under the influence, or that they don’t sneak off for a few puffs during their lunch breaks.

The problem is that it’s difficult to see if someone is under the influence if they have smoked a little bit and are slightly “buzzed.” On-the-spot drug tests won’t work because marijuana can stay in the system for 30 days or more, making it impossible to know when they used it last.

With no clear guidance, some employers have responded by relaxing their drug policies to allow for employee consumption outside the confines of the workplace, while others have kept the zero-tolerance rules in place to thwart employees who may try to use cannabis during the workday.

Employer concerns

The biggest concern for employers is workplace safety, as well as the safety of customers and even the general public if a driving employee is using while on the clock.

When someone is under the influence their judgment is impaired and their reaction time is slowed. That could lead to workplace accidents and worker injuries. That, in turn, can result in fines by OSHA as well as higher workers’ comp rates, in addition to lost time by key employees.

If an impaired worker is operating equipment in a retail establishment and injures a customer or a vendor, you could be facing a substantial liability lawsuit.

If you have an impaired driver who causes an accident and injures or kills a third party, and/or destroys a third party’s property, you could also face a liability suit.

What you can do

First, you have to decide your business’s level of tolerance for employee marijuana use. Obviously, for workers using heavy machinery, or in other safety-sensitive jobs like drivers, it would be wise to have a no-tolerance policy in place that includes drug testing.

Whether pot is legal in your state or not, you are still free to ban marijuana use on the job, just as you can alcohol – and you can fire someone for using it on the job.

It’s important that whatever policy you put in place, it is communicated to employees through a staff meeting as well as in your employee handbook. You should inform them of the consequences of violating that policy.

For the sake of workplace safety and your overall liability exposure, you should consider restricting marijuana use to the extent permitted by law.

At the very least, you should prohibit marijuana use in the workplace, as well as marijuana impairment during work hours or in the workplace.

Your approach will depend on which state your business is located in. For example, California provides a constitutional right to privacy which restricts employers from monitoring off-duty conduct.

That said, pre-employment drug-testing is generally permitted, as long as it is conducted in a fair and consistent manner and administered to all applicants for a position within a specific job class.

After employees start working, they have a higher expectation of privacy. That means you should restrict any drug-testing to suspicion-based inquiries, like someone who appears under the influence. Random testing is highly restricted in California and should be reserved for certain safety-sensitive positions.

Remember though: There are exceptions for medical marijuana use. Most workers must be allowed to take medical pot, just as they would any other legal drug.

Conduct Diversity Training to Head Off Potential Lawsuits

Happy diverse people together

After R&B star SZA said she had security called on her while shopping at a Zefora store in California, the chain closed all of its U.S. stores for an hour to conduct “inclusion workshops” for its 16,000 employees.

Zefora understood the swift backlash that can hit a company that has acted inappropriately towards a customer, particularly if they are a minority. Unfortunately, Zefora is not the only company that has made the spotlight in recent years thanks to rogue employees that cross the line and harass or discriminate against a customer, co-worker, vendor or partner.

And in the age of people video-recording these encounters, a rogue employee could sink your company if the target decides to take legal action.

The second threat is the potential backlash of customers shunning your company once the word spreads on social media. This was the case with two Oregonians who ended up closing their bakery after the public backlash that followed their decision to not bake a wedding cake for a homosexual couple.

The best way for an organization to set a tone of tolerance is through diversity or inclusion training to guide them in their day-to-day interactions with co-workers, customers, partners, vendors and others. While this type of training is not mandated by any state or federal agency, it is recommended whether or not you have a diverse workforce or client base.

Implementing a diversity training program is also an important step in helping to reduce the risk of workplace discrimination and harassment claims. In settling discrimination cases, the Equal Employment Opportunity Commission often requires companies to educate employees on the importance of diversity in hiring and promotion, and how to avoid stereotypes.

A proactive employer that wants to avoid problems from the get-go would take that step without being required to.

More important than ever

Our country is becoming more diverse with each passing year. It’s not only different races and religions, but also sexual orientation and alternative lifestyles.

The norms that dictated behavior a half-century ago are transforming. To minimize the risk that employees, supervisors or managers step out of line in this new era, employers must develop an awareness of diversity within their business through appropriate training.

Diversity in the workplace is apparent in everything from our names to the types of food we eat, and long-taboo subjects are now discussed freely. People with disabilities often work alongside openly gay co-workers, and a variety of languages are spoken by employees and customers alike.

Elements of a strong training program

For diversity training to succeed, managers must find ways to integrate the training into daily tasks. It must go beyond a once-a-year training session. Here are some ideas:

Draw the line – Make it clear that intolerance is not acceptable, and that those demonstrating prejudice have no place in your organization.

Get management buy-in – Ingrain in your managers and supervisors the importance of diversity to both boost worker satisfaction and as a risk management tool to avoid lawsuits. Managers understand the personnel dynamics among the staff they manage, as well as interactions with customers.

Treat everyone with respect – Employees should be told that if they prejudge a customer or co-worker and treat them as a lesser individual, they can face be reprimanded and, if the offense is serious enough, fired.

System for handling complaints – Create procedures that all managers must follow if they receive a complaint about harassment or discriminatory behavior, or if an employee witnesses another employee treating a co-worker, customer, vendor or another person in a demeaning way.

Hold a seminar for all employees – Review what is acceptable and not acceptable, and cover all of the above. Try to focus on positives and give employees the opportunity to ask questions.

Why Your Business May Need Pollution Insurance

pollution

Many businesses that produce some type of pollutant throughout the course of daily business operations don’t know they are doing so.

Others know they are producing pollutants and have processes and safeguards in place to reduce their release into the environment. A business can be held liable for some very costly damages when these byproducts pollute another property or harm another individual.

Pollution liability clauses were once part of general liability policies, but the extensive asbestos problems in the 1970s spurred most insurers to remove pollution protection from their general liability policies.

Today, pollution liability coverage is obtained through a separate pollution insurance policy. Pollution insurance policies are written for businesses of all sizes, shapes, and forms – from pig farms and printers to apartment complexes, salons, and dry-cleaning businesses.

Why pollution insurance?

Many businesses run the risk of creating pollution during normal daily operations.

There’s also a risk from any existing pollution already on a business’s site of operation. In either case, a business could be held liable if its pollution ends up on a third party’s property, causes damage to the property or harms an individual.

Without insurance, the business would be on the hook for paying for those damages out of pocket.

What do policies cover?

The basic premise of a pollution policy is that an insured party gets a claim related to damages caused by pollution it caused.

This insurance will protect your financial interests in the event a clean-up becomes necessary. Buying pollution liability insurance will cover your interests against lawsuits where a third party could be injured by a toxic substance produced as a result of your work.

Like most types of insurance, the specifics of a pollution policy can vary somewhat from insurer to insurer.

Depending on the insurer, a pollution policy will typically cover

  • Damage to properties and individuals
  • The cost of cleaning up pollution on a third party’s property
  • Pollution incidents that occurred after the policy was
  • Investigative, legal, and court costs should the claim enter the legal system.

Who needs coverage?

Businesses that have risks related to the handling of pollutants and hazardous materials, design professionals who work with projects where there are environmental issues, as well as those who own and occupy premises that have environmental issues, need pollution liability insurance.

This includes:

  • Property owners and tenants whose buildings and land have a history of having pollutants on the property or premises. This would include a building on land that had an underground storage tank that leaked fuel oil before it was removed, contaminating the soil.
  • Contractors such as roofers who handle pollutants like tar as a part of their operations need contractors pollution liability insurance to cover damage resulting from a pollution incident.
  • Architects and engineers who are involved in projects that have issues related to pollutants need to add pollution liability to their errors and omissions insurance policy to manage the risk of making a mistake regarding the presence or absence of pollution issues as they plan and execute a project.

The takeaway

Don’t overlook pollution insurance as an important element of risk management. Should any questions or concerns about pollution insurance and insurance requirements arise, call us.

Business Growth Can Lead to Increased Risk

Business Growth

As the economy continues expanding, companies need to be careful about properly managing their risk, according to a report by Advisen Inc., an insurance research and data firm.

Increased activity typically means proportionally additional losses. For example, more trucks driving more miles will inevitably result in more accidents. However, there are other kinds of risk that can actually increase more than the jump in business activity. We look at three such areas here.

Workplace safety

Workplace injuries can increase as firms hire workers that have less experience. Typically, when employers expand their workforce to meet the growing demand for their products and services, the number of workers’ compensation claims tended to rise disproportionately.

New employees with less experience typically are more likely to sustain a workplace injury. At the same time, experienced staff may look for new job opportunities as compensation begins to take priority over job security.

What you can do: One option is to hire a temporary-staffing firm to fill positions. In these relationships, the client company is not responsible for covering temporary workers.

But you should be aware that OSHA requires what is known as the “dual employer doctrine”, under which temps are considered employees of both the agency and the company using them. And you are also not off the hook for providing them with a safe work environment and safety training specific to their job.

And remember: Check to make sure the temp agency has workers’ comp insurance.

Litigation increases

The risk of being sued rises as employees make mistakes due to pressure on existing staff to increase production, and again when less experienced workers are added to the payroll.

Your workers may be putting in extra hours. But fatigued workers make mistakes. For example, some of the worst industrial disasters have been in part the result of tired workers. Bhopal, Chernobyl and the Exxon Valdez oil spill all involved decisions made late at night or extremely early in the morning by people working long hours.

In addition, inexperienced employees are more like contribute to incidents where outsiders are hurt.

What you can do: Conduct thorough interviews, check references and carry out background investigations when appropriate to avoid hiring people with known problems. You are responsible for the actions of your employees.

Also, make sure that you are not overworking your staff. Provide proper breaks so they can rest, especially in jobs that require attention and strength.

Labor law violations

Trends in litigation and regulation make it more likely that companies will be charged with labor law violations. Employees are braver now about filing complaints, thinking they have a good chance of landing a new job if they are fired.

In addition, the federal and many state governments have cracked down on wage and hour law violations.

As well, some companies may try to add to their worker pool by using more independent contractors, in order to avoid hiring new workers. But the federal government has mounted a serious crackdown on companies that inappropriately classify employees as independent contractors.

What you can do: Pay close attention to your payment systems and audit your systems to make sure you comply with wage and hour laws as well as meal and rest break laws.

The takeaway

The lesson is to increase your vigilance in managing your risk and review your existing risk management strategies for gaps due to business growth.

You can take the following steps to reduce your chances of increased claims:

  • Maintain high standards when hiring new employees, such as conducting thorough interviews, checking references and, where appropriate, investigating backgrounds;
  • Properly train and supervise new employees during a growth phase;
  • Consider your current policies on temporary workers, and weigh the benefits of a flexible workforce against liability issues that temporary workers pose;
  • Revisit your policies about independent contractors, especially in light of the U.S. Department of Labor’s efforts to ferret out misclassification;
  • Pay attention to overtime rules to ensure compliance with the law; and
  • Keep shareholders informed as much as possible about any mergers or acquisitions, including terms of the transaction.

Property Coverage for Businesses with Changing Needs

Some businesses have very stable property insurance needs as the value of their non-building assets, equipment and inventory doesn’t vary much during the year.

Other types of business experience wide variations in the value of their property. Florists tend to carry more stock around Valentine’s Day and Mothers’ Day than they do on most days of the year. Many retailers earn most of their profits during the holiday shopping season, so they keep larger amounts of stock on hand during that period.

Warehouses and manufacturers may have variable amounts of product on their premises with vastly different values. Depending on the flow of orders, the value of their stock may change greatly from month to month, or even more frequently.

A traditional property insurance policy will not meet the needs of businesses like these. To secure enough coverage, they would have to buy an amount large enough to cover those times when values are at their peak. But, for much of the year that would leave them paying for more insurance than they need.

Businesses in this situation may want to consider two coverage options:

Peak season coverage – This coverage is appropriate for firms that can predict those periods when their values will increase. Examples are florists, toy, electronics and clothing retailers during the holiday season, school supply stores in late summer, and costume shops in October.

The coverage form states the location and type of the property, the amount of additional insurance, and the period during which the higher amount applies. For example, it might show that insurance on goods for sale will increase by $100,000 from Oct. 1 to Jan. 1. This gives the business plenty of coverage for the busy time, but saves it from having to pay for all that coverage the rest of the year.

Value-reporting coverage – This coverage is for those firms with asset and inventory values that fluctuate all year long. It requires the business to buy an amount of insurance large enough to take care of the peak periods.

But, the insurance company will charge a lower initial premium than that amount would ordinarily require. The firm then must make periodic reports of its values to the insurer. Depending on the option chosen, this will mean sending reports monthly, quarterly or once per year.

Again, depending on the chosen option, the reports can show values as of the end of each business day, week, month, quarter or year. After the firm has submitted all of its reports for the policy period, the insurance company determines the business’s average values and calculates the final premium.

Firms that choose value-reporting coverage must take care to submit the required reports on time and accurately. The form gives the insurance company the right to reduce claim payments for losses to the property when reports are late.

The insurer can also reduce a loss payment if it finds that the policyholder underreported its values. The limit of insurance does not automatically increase if the reports show values higher than the limit; the firm must request an increase in coverage.

The takeaway

Any company with variable property values would be wise to consider purchasing one of these types of coverage. With some careful planning, a business can limit its insurance costs while still getting the coverage it needs. Call us if you have questions about this type of coverage or to discuss whether it’s appropriate for your operations.

The Risks of Staff Using Personal Devices for Work

Bring your own device

As more employees use their personal mobile devices for work companies are being forced to confront the resulting security implications as well as how the devices are changing behaviors in the workplace.

That’s according to a report by Littler Mendelson, an international law firm specializing in employment and labor law. The report highlights the dangers and benefits of allowing employees to use their personal devices at work.

As more people buy smart phones and tablet computers and bring them to work to use to perform company tasks, businesses have responded by implementing policies that allow employees to use their personal mobile devices to create, store, and transmit work-related data.

This trend is generally referred to as “Bring Your Own Device” or BYOD. Some companies even allow employees to replace their work laptop computer with their own personal PC, which is sometimes referred to as BYOC.

The report highlights two broad categories of risks personal devices in the workplace pose: data risks and behavioral risks.

Data Risks

The report looked at five information security threats posed by BYODs:

Lost or stolen devices – According to study by the Ponemon Institute, 39% of respondents reported that their organizations had sustained a data security breach in 2011 as a result of lost or stolen equipment. Put simply, if your employees use their personal mobile devices for work, your company data is at risk if they lose their gadget.

Malware – In February 2012, Juniper Networks reported a 155% increase from 2010 to 2011 in the volume of malicious software created for mobile devices, and malware targeting the Android platform rose 3,325%.

Friends and family – A report by the U.S. Treasury Department’s Financial Crimes Enforcement Network found that in 27.5% of suspicious activity reports filed by depository institutions between 2003 and 2009, the identity theft victim knew the suspected thief, who was usually a family member, friend, acquaintance, or an employee working in the victim’s home.

Links to the cloud – A number of apps for mobile devices allow users to store their documents and data using cloud-based storage, the report states. Employers must evaluate whether the sites provide sufficient security if the employee plans to store company information using the apps.

Security breach – If you have a breach in security, it could expose your company to government enforcement actions, civil penalties and litigation. There are both federal and state-level statutes and regulations on the books that govern storage of personal information in addition to contractual obligations, which increasingly are including responsibilities to safeguard against data breaches and the consequences for failing to do so.

Behavior issues

There is another downside that has not been much discussed. In the 2011 National Business Ethics Survey, the Ethics Resource Center reported that active social networkers (employees who spend 30% or more of their work day participating on various social network sites) are more likely to believe that certain questionable behaviors are acceptable, such as:

  • “Friending” a client or customer.
  • Blogging or tweeting negatively about your company or colleagues.
  • Keeping a copy of confidential work documents in case they need them in their next jobs.
  • Taking a copy of work software home for use on their personal computers.

In addition:

  • Wage and hour implications can arise from using a mobile device to conduct work while off the clock.
  • Both state and federal laws require employers to reimburse employees for expenses that arise in the course of doing their jobs. Once employees are using their own devices it raises questions of whether the employer is required to reimburse for the cost of the device, the data plan and monthly phone bill.

Littler Mendelson includes in its report a slew of recommendations for employers. When drawing up policies on BYODs, the employer should:

  • Decide which employees should be permitted to participate in a BYOD program. You may want to exclude senior executives whose data is more likely to be relevant in litigation, research and development employees and sales staff, who may store client information on their devices.
  • Create policies that address off-the-clock work.
  • Staff should know that if they BYODs the company must be authorized to access their devices for record retention or litigation holds or investigations.
  • Before allowing employees to use dual-use devices to perform work, companies should obtain their written consent to monitor the device, remotely wipe the device, install security software and copy data if necessary.
  • Follow good security practices.
  • Create policy barring friends or family from using the device.
  • Create a policy limiting the use of cloud-based storage.
  • Address safety issues, including a prohibition using the device while driving.
  • Your policy should include consequences for non-compliance.

Don’t Overlook Equipment Breakdown Insurance

Imagine it’s a typical July day. You own a 30,000-square-foot office building that is 85% occupied. And the air conditioning and ventilation systems stop working. The outside temperature is in the 90’s and the humidity is high. It doesn’t take long before the tenants start to complain.

The contractor you summon determines that an electrical arc fried the circuit board that controls the systems.

The board must be replaced, but it will take up to five business days for it to arrive. In the meantime, the building is unfit for people to work in, and the leases oblige you to credit tenants’ rents for periods when the building in uninhabitable for more than a day. In short, you face thousands of dollars in repairs and much more in lost rents.

While your property insurance policy will cover the resulting property damage from fires or explosions, it will not cover the equipment or lost income from the downtime during repairs.

But equipment breakdown insurance will.

Equipment breakdown insurance

This form of insurance is not a substitute for other property coverage. It will not pay for damage caused by fire, lightning, explosions from sources other than pressure vessels, floods, earthquakes, vandalism, and other causes of loss covered elsewhere.

Equipment breakdown policies are designed to fill in the gaps left by other policies, not to replace them. Also, they do not cover mechanical breakdowns that result from normal wear and tear as a device ages.

A number of events can trigger a claim for equipment, such as:

  • Mechanical breakdown in equipment that generates, transmits or uses energy, including telephone and computer systems.
  • Electrical surges that damage appliances, devices or wiring.
  • Boiler explosions, ruptures or bursts.
  • Events inside steam boilers and pipes or hot water heaters and similar equipment that damages them.

Business owners often overlook equipment breakdown coverage. Bur, virtually all of them have some need for this insurance.

What equipment breakdown insurance covers:

  • The cost of repairing or replacing the equipment.
  • Lost business income from a covered event.
  • Extra expenses you incur due to a covered event.
  • Limited coverage for losses like food spoilage in freezers that break down.

Most businesses rely heavily on machines in their daily operations, from computers to refrigeration equipment and elevators to manufacturing equipment.

For some, the cost of repairs to this equipment and resulting downtime can have a serious impact. Such businesses should seriously consider buying equipment breakdown insurance.
Call us if you would like to discuss this crucial form of coverage.

Workers’ Comp Audit Mistakes: What to Look For

calculate

No company owner wants to undergo a workers’ compensation audit, but they are a fact of life if you run a business and have employees.

Unfortunately, many audits don’t go smoothly and sometimes your insurer may make mistakes. Missouri-based Workers’ Compensation Consultants, which helps employers through the workers’ comp audit process, recently listed the 10 most common audit mistakes that insurance companies make.

The list highlights a common problem and how you can detect the mistakes to avoid being stuck with a massive audit bill. Insurance companies allow you to review the audit with your broker. If you notice that you have received an audit bill that is obviously overstated, you should contact us.

Here are the things to look for when reviewing an audit by your insurance company:

Wrong class code – Misapplication of job classifications occurs in many workers’ comp audits. With hundreds of job classes to choose from, mistakes can happen. Talk to us and review your old policies to see if any of your class codes have changed.

X-Mod is changed – After your insurer finishes the audit, it will use the information to calculate your premium. When that happens, it has to include your X-Mod to get the right rate. But sometimes the insurer may use an incorrect X-Mod. Check carefully.

Subcontractors are counted – Sometimes insurers will include subcontractors as employees, which results in a new audit bill to account for the additional “employees.” But if they are genuine subcontractors, they should not be counted. Often, uninsured contractors will be included as employees. Make sure to use insured contractors only.

Disappearing credits – Most policies will have some sort of premium credits or other modifiers. Sometimes during audits, the insurer will remove them when recalculating the premium they think you owe. Watch out for missing credits and other modifiers if you get an audit bill, like:

  • Premium discount
  • Schedule credits
  • Deductible credits
  • State-specific credits

 

Audit worksheets missing – If the auditor fails to provide you with audit worksheets, which are used do compile your payroll and other audit information, you should ask to check their work. They will provide you with the information you need to carry out such a check.

Your rates changed – The rates you are charged at the beginning of your policy period must remain the same for the entire policy period. If your base rates have changed, the insurer may have made a mistake. 

Separation of payroll – Depending on your industry, you may or may not be able to split your employees’ payroll between job classifications (like cabinet installers and sheetrock hangers). This is a pinch point when errors can occur. If the auditor says you are not allowed to split job classifications even though you have in the past, your audit may be in error.

Unexpected large premium due – If you get a significant bill for your insurance company after your audit, the auditor may have made mistakes, particularly if you know that your employment has remained relatively stable and you’ve had no significant claims, if any. If it seems out of whack, call us.

Payroll data doesn’t match – If there is a discrepancy between your payroll data and what you see on the audit, a mistake may have been made. Try to match the payroll on the audit with that generated from your accountant. If the insurer made a mistake, you could end up paying for phantom payroll numbers.

No physical audit – There are three types of audits:

  • Mail audit
  • Phone audit, and
  • Physical audit

 

The mail and phone audits are prone to errors, since neither you nor your staff likely have any experience in premium auditing. If you have a big bill after a mail or phone audit, mistakes could have been made.