Don’t just renew “as is” It is highly recommended that you secure an update each year with your client as to what their work plans are for the next policy term. If your client only has “partial” other states coverage (did not get “all states except monopolistic states” listed in item 3.C), you want to be extra cautious in assessing your client’s situation. There have been many E&O claims where the client apparently did not understand the “rules” and opened up a permanent location in another state only to have an employee injured – and then discover there was no WC coverage in effect. As you will note by the following claim, when moving the account to another carrier, be certain the coverage is at least equal. In this claim, the agency failed to properly replace WC coverage for a trucking firm that had “other states” coverage on a previous policy. The new policy only covered losses in the state in which the client was domiciled. The client had an employee injured in another state, only to find they had no coverage for losses occurring in that state. The case settled for $317,000. Even if your client had the preferred wording, keep in mind that the policyholder must notify the company “at once” if they begin any work in any state listed in item 3.C. If the insured is working in a state not listed in item 3.A on the effective date or renewal date of the policy, there is only 30 days coverage, unless the carrier received notice, for benefits paid under that state’s statute. Relying on item 3.C to provide
automatic coverage can be a dangerous practice. State requirements In New York, it is mandatory to have New York listed if the insured has any New York exposure – even if it is incidental. In fact, sources confirm that New York has started to levy fines against employers if there is an exposure in New York but the state is not listed. Thus, keep up with and comply with the various state regulations! And as indicated above, Ohio also changed its law in a way that can adversely impact out-ofstate employers with incidental operations if they do not fully understand the requirement. Insuring contractors? This class of business has its fair share of E&O claims arising from improper handling of the WC exposure. Sometimes, the terms of the contract with a sub-contractor call for the general contractor to supply the Workers’ Compensation coverage. If you are insuring the GC, work with your client to understand this stipulation and take the necessary action. Don’t wait for an employee of the subcontractor to be injured to find out that no WC coverage was in place. Be alert to communication from your carriers regarding coverage status This is a claim where the agency procured Workers’ Compensation for a small contractor. After the policy had been in force for a month, the carrier cancelled the policy for underwriting reasons. Both the client and agent denied seeing a cancellation notice and thus no replacement policy was procured. It was not until a worker was injured
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several months after the cancellation that it was discovered the WC policy had been cancelled. The client was forced to pay the benefits and sued the agent. A review of the agency’s records revealed a fax the agent had received from the carrier one month prior to the cancellation date clearly indicating the policy was to be cancelled. Because the agency failed to act on the fax, the case was settled for $11,000. U.S. Longshoreman and Harbor coverage Do you have a client that is subject to the Longshore and Harbor Workers’ Compensation Act? This act, administered by the U.S. Department of Labor, provides medical benefits, compensation for lost wages and rehabilitation services to longshoremen, harbor workers and other maritime workers injured during the course of employment or who suffer from diseases caused or worsened by conditions of employment. Placing this coverage may not be easy and extra caution should be exercised. As you will note by the following example, the dollars at stake can be high. The client requested U.S. Longshoreman and Harbor coverage be provided for their employees. The agency went through a broker to place the coverage. An employee of the client was injured and the carrier disclaimed, saying there was no policy in place. The employee lost wages and incurred medical bills and attorney fees. The client was faced with the cost of an attorney and had to pay fines for not having coverage in place. Although the carrier felt the broker was at fault – there was documentation on file supporting the position that the broker had agreed to