The Ghost Policy - A Workers Compensation Sham!

What is a workers compensation ghost policy? Is it something you can see on the next episode of the "Ghost Whisperer?" Not really, read on!

A ghost policy is typically a workers compensation insurance policy sold by an insurance agent to a business owner, usually a contractor, who has no employees and has elected, if allowed to do so in his state, to not include himself within the policy coverage. Most times these policies are issued with one thing in mind:

• so the business owner can secure a certificate of insurance.

Let me recap, a business owner buys a workers comp policy, has no employees and excludes himself from coverage....hummm, sooo....if no one is covered by the policy...why buy it? Usually so the business owner can give that certificate of insurance to someone he's working for. But wait a minute...there's no one covered by that insurance policy right? Right! So...the certificate of insurance is worthless, right? Right! Why do it? It's usually about the money.

Workers compensation insurance is expensive and the purchase of a "ghost policy" usually falls below the minimum premium charged by the insurance company or allowed by the state. Let's say the minimum premium is $900 and for the business owner to include himself within the coverage his premium would be $2,200....are you starting to get the picture?

So why is this such a bad thing? To start with, in my opinion, it's a sham! Employers who hire subcontractors to perform work for them will require the subcontractor to provide them with a certificate of insurance, proof that workers compensation coverage is in place. This is done to protect the general contractor or employer from work related exposures associated with injuries sustained by the subcontractor or his workers. In other words, if the subcontractors workers are injured on the general contractors job then the subcontractor's workers comp policy would take care of his workers. In absence of a valid workers comp policy, the general contractor may be responsible for the subcontractor's workers. Oh yea...the general contractors insurance company would also be happy to charge him for those workers comp exposures generated by the sub, whether a claim occurred or not!

So could that business owner who bought a workers compensation ghost policy but did not include himself in the coverage make a claim against the general contractors policy, yep.

There's plenty more on this topic...but for now lets just say a workers comp ghost policy is in no one's best interest!

Hope this helps you out!

Employee or Independent Contractor - A Workers Compensation Issue

"I thought he was an independent contractor!" ...No, son, that's what they call an employee!

If you've been around the workers compensation business for a while employee or independent contractor is something you'll hear quite a bit. Whether it's done on purpose or an honest mistake the line between a legitimate independent contractor and employee may be blurred at best. Over the years I've worked with many clients who were caught in this workers comp trap. ....It could happen to you!

An example...Lets say you have an office based business, maybe you own an accounting firm, and have an individual come into your office several times a week after hours to clean, you know, empty trash, vacuum, dust, etc. You hired this person because they also clean you home and you like them cause they are trust worthy and do a good job. So, for workers compensation purposes are they an employee or independent contractor?

Another example...You own a successful floor covering store. Your employees conduct sales both on and off your premises and you have a office staff. You hire a handy man to do some repair work on the gutters on your building and he falls off his ladder breaking his arm. Employee or independent contractor?

You might be surprised at the answers and just how the answer might effect your workers compensation premium!

We'll continue with this topic a little later.

Misclassifying Workers - A Nebraska Workers Comp Problem

Things are still tough out there! With the economic down turn we are seeing more and more employers incorrectly classifying their employees as independent contractors or subcontractors instead of employees all in the hopes of reducing the cost of workers compensation, employee benefits, payroll taxes and unemployment insurance. This scary trend is rampant in the construction industry.


For workers compensation purposes, when an employer purposefully misclassifies an employee as an independent contractor they are trying to avoid paying workers compensation premium on that employee. By doing so, the employer would potentially save many thousands of dollars in workers comp premium. Unfortunately employers who practice this activity leave their workers exposed to uncovered on the job injuries. Leaving the employee's only recourse for compensation that of pursuing a legal outcome against the employer either through the state authority. through the courts or both. All flying against the basic reasoning for workers compensation protection, that of protecting the employee.

So here's the scoop...look for more individual state legislatures and the IRS to crack down hard on those employers who abuse the independent contractor/employee status. As a matter of fact, Nebraska has a current workers comp bill pending that, if passed, will impose heavy fines on employers who treat workers as independent contractors in violation of their states definition of an employee.

Yes it's tough out there, but congratulations to the State of Nebraska for their efforts in correcting this big workers compensation problem found in the construction industry!

Check out this link for more information on Nebraska Workers Compensation.

Georgia Workers Comp Carrier Declared Insolvent

Georgia Workers Compensation insurance carrier, Southeastern US Insurance Company, has been declared insolvent. According to recent news out of Georgia, John Oxendine, the Georgia Insurance Commissioner, will act as the liquidator. This action has been approved by Fulton County Superior Court Judge Thomas Campbell.

It's estimated approximately 3,000 Georgia employers will be impacted by this action. Southeastern US Insurance Company specialized in providing workers compensation coverage to organizations like hospitals, associations, public entities and private companies alike and it was reported they were the eighth largest workers comp provider in the state of Georgia.

So as of October 27, 2009, the date Judge Campbell approved the liquidation, all business with Southeastern US Insurance Company was required to cease. For further information about this liquidation contact the Georgia Insurance Commissioners office. Also here is a link with information about this liquidation.

North Carolina Workers Comp Rate Reduction

North Carolina Workers Compensation rates are going down! The North Carolina Rate Bureau sought and secured a workers comp rate reduction amounting to an average 10% reduction in workers comp rates for North Carolina employers. To take effect in April, this reduction will save employers an estimated $120 million and applies to employers who purchase their insurance coverage on the open market.

This news follows last years reduction which amounted to an approximately 4% savings for North Carolina employers.

Certainly a good trend in the cost of North Carolina workers comp insurance.

Tennessee Workers Comp - New Law for Contractors

Watch out when the government gets excited and tries to fix a problem! That's what's going on in the Tennessee Workers Compensation arena with a new law that was designed to level out the contractor playing field. This new law...to go into effect December 31, 2009, requires a sole proprietor to carry workers comp insurance. This law was originally intended to address the problem of workers comp stacking, where an employer would declare that their staff was in fact individual sole proprietors and fell outside the law requiring workers comp coverage be provided for all employees. In fact a poor attempt practiced by some contractors and used to skirt around the workers comp requirements that an employer provide coverage for their employees.

It's estimated that in this case the new law would force around 10,000 contractors to purchase workers compensation insurance! Wow! This couldn't have come at a worst time! Many of the small single owner operator contractors would be forced to purchase a policy potentially costing thousands of dollars!

So the good news....Tennessee State Lawmakers are reviewing the law trying to find a way to reduce the negative effect. However, this may take some time to work its way out and in the mean time December 31, 2009 is ticking closer and closer!

So if you are a contractor in the State of Tennessee, make sure you are compliant with the new state workers comp law!

Florida Work Comp Rates Down 6.8%

Good news for Florida Workers Compensation?? We'll have to wait and see!!

Recently the Florida Insurance Commissioner, Kevin McCarty, gave final approval to NCCI's amended workers comp rate filing. New Florida workers comp rates will be effective January 1, 2010 with an overall 6.8% decrease.

So here's the real news...with this rate decrease, Florida has experienced an overall decrease in rates totaling more than 63% since 2003! Isn't that a good thing for employers?

Along with this news of course come comments from those who think this action will lead to the ruination of Florida workers comp system. Some are saying these rate decreases are artificial, just a function of government with decisions made without regard of increased loss ratios and costs and decreasing income and profits for the insurance companies. That many of the Florida workers comp carriers are in a pickle and that a big shake out is just a short walk down the road. We'll just have to wait this out and see!