Many public liability policies are based on estimated sales, payrolls, cost of subcontractors or number of employees, and are subject to audit. At the beginning of the policy term, representations were made to the insurance company regarding the business that you expected to have, and an audit reviews your actual payroll or sales. Before paying an additional premium audit, compare the exposures shown to your own records, and compare the premiums credited to your records. Even if they match up, have your agent review the audit and confirm that the proper codes have been used in the calculation, as mistakes can happen. Good luck!
Questions & Answers
You Ask, The Hound Answers!
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"I just received a bill for over $5,000 for additional premium under a general liability policy that expired in 2011. I paid the $1,200 inception premium on installments, and I never missed a payment. How can this be?"
"I currently have a general liability policy for liability with a local agent. When I recently asked if I had coverage for a claim where I had received a motion for judgment, my agent said coverage did not apply and suggested that I not turn in the claim and pay it out of my pocket. The amount of the claim was for over $3,000 for injuries sustained in a fall. What should I do?"
Make your claim in writing and ask for a coverage determination under your policy. At Brown’s Insurance, even when the agents THINK they know the answer to a coverage question, a claim is turned in for coverage determination since case law constantly evolves. In several ways, the basic policy forms used by companies today have not changed in 20 years, but the court interpretation HAS. I never believe that it is a good idea to pay a claim directly until your carrier has denied coverage, since doing so violates a policy coverage condition – you should not admit liability, as doing so eliminates any ability to defend a claim for which you may not be legally liable.
"I have a workers compensation policy for my Virginia based business. I want to be sure my laborers are covered under my policy. I have both direct employees and some casual labor. Are these laborers covered?"
The proper legal answer is to say that each case is different, and coverage is always determined by the workers compensation laws of the Commonwealth of Virginia. Existing case law can always change an interpretation, but as of January 2012 the general answer in VA would be as follows: To be covered, a paid laborer must meet the definition of an employee, since your policy covers employees as defined by statute. Whether you provide the employee a W-2 or a 1099 form does not determine who is an employee, although a W-2 usually indicates that the paid individual does work for you. As respect to a 1099 recipient: 1) Do you exercise control over his/her activities and tell them where and how to perform a job? 2) Does he/she offer their services to others as well, or do they work only for you? In most cases if they work only for you they would meet the employee definition. One of the stickiest situations can involve a situation where you pay one person by 1099, and he/she brings in friends that he/she then pays to “help”. By statute, your policy covers the uninsured employees of an uninsured subcontractor, BUT NOT the subcontractor himself/herself. In this case, the “friends” would likely have coverage, but the paid “employee” would not, since they were in fact a subcontractor. The VA Work Comp Commission would make the final call, as each case is different. Contact Brown’s Insurance or your local agent for specific details.
"My agent has told me for years that there is no difference in pricing between workers compensation carriers. Is this true?"
While the final answer depends on where your business is based, I believe that the correct answer is an emphatic, “NO!”. Rates are based on payroll and apply on a per $100 basis. For a business buying workers compensation insurance in Virginia, the applicable rates are determined by several factors. For a simple example, if a business has $100,000 payroll for a drywall business, the base rate could range from a high of $5.62 (April 2012 NCCI rate) to a low of $3.29 (April 2012 base loss cost). Costs are further affected by the loss experience of the business (experience modifier may apply) and the discretion of how a given carrier may want to apply credits (up to 15% in VA). In the example shown above, the initial rate difference between the highs and lows is $2,330, which is a big difference on a relatively low payroll.