How do you know if your business or organization is being charged the correct amount for workers compensation insurance? I'm not talking about whether or not you think your premium is too high. I'm asking what procedure do you have in place to confirm that what your business actually does is properly reflected in your rate classification? I'm waiting...OK that's what I thought.
Does This Describe Your Company?
When you first went into the widget manufacturing business you understood that if you were going to have employees, you were going to have to buy workers compensation insurance. (If you didn't realize it now would be a good time to read my previous article). So you called your insurance agent and said you were about to hire your first employee. Your agent had always done a great job on your car insurance so you figured she's probably an expert at workers comp insurance as well. The agent came out and looked around your new business. She then consulted her trusty workers comp rating manual from XYZ insurance company and picked one of the available 330 classifications approved by the Pennsylvania Compensation Rating Bureau (PCRB) and assigned it to your business. The insurance company then charged you a premium based on your classification and your payroll. End of story right?
Now It's 10 Years Later
Congratulations! Not only have you remained in business for 10 years you've really prospered. Now instead of just one employee, you have 50. And boy has your business changed. No longer do you just make widgets, you distribute, install, and service them. In fact, you don't really manufacture them at all. Five years ago you decided it was cheaper to outsource the manufacturing part of the business. Throughout this time your agent checked in with you and steadily increased your payroll as your number of employees increased. But she hasn't walked through your facility in 10 years and doesn't understand that your business has fundamentally changed. Therefore, you're still paying your workers comp premiums based on a manufacturing rate. Think a manufacturing rate might be higher than a service rate?
Is Misclassification Pretty Rare?
NO! Multiply that by the number of years you've been misclassified and you may begin crying like a baby. The industry consensus is that anywhere from 60%-75% of all companies have some sort of miscalculation figured into their premium.
What Could that Mean to My Organization?
Assume that the rate for widget manufacturing is $8 for each $100 of payroll. We'll further assume that 40 of your 50 employees are currently classified as such and as a group represent $1,200,000 of payroll. Your unadjusted workers comp premium for this group would be $96,000 per year. But what if your employees were properly classified at the lesser widget service rate? For this example we'll assume the rate to service widgets is $5 for every $100 of payroll. Well, you just saved yourself $36,000 a year. Multiply that by the number of years you've been misclassified and you may break down in tears!
How Can I Prevent This From Happening?
The answer here is twofold: (1) Partner with an insurance provider who doesn't forget about you as soon as they write your insurance policies. (2) Make sure that your provider understands the nuances of workers compensation insurance and is proactive in monitoring your account. In our example above, the agent did check-in periodically to update your company's payroll. But she didn't realize that the business had changed and that a re-classification was in order. A costly and unnecessary mistake!
So What Can You Do Now?
Next week I will be publishing a follow up article showing how you can find out if this has happened to your company and also how you can recoup some of your money. Until then, feel free to contact me using the information below.
Most of workers involved in Workers Compensation claim or lawsuit do not realize they can get workers compensation funding or worker comp loans before their case settles. If you are a worker plaintiff, involved in a Workmans comp case or lawsuit and represented by an attorney, you may be eligible for an easy cash advance on your pending Workmans compensation settlement.
This is also known as non- recourse Workers Compensation lawsuit loan, Workers Comp funding, Workmans Compensation loan or Workmans Comp funding.
When a person works for a living, a personal injury or disability can have a serious impact on his or her life, family, health, and finances. The road to recovery is sometimes long and expensive, and a worker might well lose his/her home, health and family waiting for relief.
You may have a strong Worker Compensation case or lawsuit and a great attorney representing your case, but the insurance companies can afford to wait. But you can not, you need money now. Without a workers comp funding, you may have no choice except to settle your Workers Compensation claim or lawsuit for whatever you can get.
But with a workers comp funding or loan, you also get the advantage of some deep financial pockets yourself. A solid worker compensation funding company is always backed by vast institutional funds. So you will not have to accept too little too early from the insurance company that provides your Worker Compensation (Workers Comp, Workmans Comp or Workmans Compensation) coverage.
Workmans compensation funding companies will not fund a Workmans comp claim or lawsuit if the state statute concerning direction of payments requires the claim to be paid directly to the claimant and not first to the trust account of attorney? These states are: AR, AK, CA, DC, HI, KS, KY, MA, MD, MN, NC, NJ, NV, NY, OR, PA, TX, UT,VA, WA, WI. But they provide workers compensation claim funding in all other states, i.e. Al, CT, DE, FL, GA, ID, IL, IN, IA, LA, ME, MI ( case by case), MS, MO, MT, NE, NH, NM, OK, RI, SC, SD, TN, VT, WV.
Third Party Liability Lawsuit:
When an employee is injured in the course and scope of employment as a result of a negligent third party, the worker has the right to pursue a lawsuit against the third party in addition to pursuing a workers compensation claim. For example if a wire cable installer negligently hid a wire that caused your trip and fall at your work place; you may sue the cable company. Other examples would include a work place injury caused by a faulty machine supplied by a vendor.
Third Party Lawsuit Loan Funding:
When you are involved in Third Party Liability lawsuit you can get a lawsuit funding or a lawsuit loan on your pending lawsuit in every state except in Ohio. This is also a non-recourse loan, which you pay back only and if you win or settle the case.
Workers Compensation Claim and Lawsuit Funding Program - Features and Benefits:
1. No application fee, no up-front fees: A good workers comp funding company should not charge any application fee or any upfront fees at all.
2. No credit requirements or employment history - To apply for workers comp claim funding, the credit score of plaintiffs is never an issue.
3. No monthly payments - A good workers compensation funding company would not charge any monthly payments.
4. No settlement? No repayment - Once you get a workers comp loan, you pay back to workers compensation funding company only and if you win or settle the workers compensation claim or lawsuit. If you lose your case, you do not owe the worker compensation funding company anything. The workers comp loan advanced to you is yours to keep.
The workers compensation claim funding or worker comp case loan is the totally safe, secure, no-risk solution. This protects your family, assets and any needless jeopardy to your credit history.
Both Eric Patrick & Paul Sherman are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Eric Patrick has sinced written about articles on various topics from Small Business, Legal Matters and Tax Deductions. Eric D. Patrick, is an attorney and Chief Operating Officer of Consumers Insurance Agency Inc.