workers comp – Setnor Byer Insurance & Risk

Paying Less for Workers’ Compensation Insurance by Focusing More on Workplace Safety

Do you know the secret to getting cheaper workers’ compensation insurance? It’s maintaining a safe workplace. In addition to being required by law, providing a safe workplace is good for business. An effective workplace safety program can protect employees from harm and even save lives. It can reduce costly and disruptive injury-related employee absences and work restrictions. And, since fewer workplace injuries means lower premiums, it can also save money.

The first step to developing an effective workplace safety program is identifying the most common causes of the most serious workplace injuries. According to Liberty’s 2019 Workplace Safety Index, these are the top ten causes of disabling injuries at work.

Overexertion involving outside sources (lifting, pushing, pulling, holding, carrying, etc.)
Falls on same level (slipping on the floor)
Struck by object or equipment
Falls to lower level (falling from ladder, platform, etc.)
Other exertions or bodily reactions (crawling, bending, reaching, twisting, kneeling, walking, etc.)
Roadway incidents involving motorized vehicles
Slip or trip without fall (injured while resisting a fall)
Caught in or compressed by equipment or objects
Repetitive motions involving microtasks
Struck against object or equipment (ex. walking into an open drawer or door)

It’s important to note that the most common causes of serious workplace injuries vary by industry. For example, falls to lower levels are the most common cause of injury in the construction industry. They account for $2.5 billion in losses and represent 25% of the industry’s non-fatal injury cost. In the professional and business services industry, however, falls on the same level are the leading cause of injury. They account for $1.92 billion in losses and represent 24% of the industry’s non-fatal injury cost.

Knowing how and why workplace injuries occur puts employers in a better position to develop and implement their own safety and training programs. This is important because employers have the ability to control their workers’ compensation insurance premiums, for better or worse.

Those with an effective workplace safety program pay less. Those without pay more. Please contact us to learn more about reducing your workers’ compensation insurance premiums by implementing an effective workplace safety program.

Florida Employers Will Be Paying Less for Workers’ Compensation Insurance in 2019

Great news for Florida employers! The Office of Insurance Regulation approved a statewide overall workers’ compensation rate level decrease of 13.8 percent for new and renewal policies starting January 1, 2019. This will be the second consecutive year that rates have gone down in Florida.

The rate decrease is due in part to declines in claim frequency resulting from safer workplaces, enhanced workplace efficiencies and an increased use of automation and innovative technologies. Reduced assessments and increased investment income also contributed to the rate decrease.

When combined with the 9.5 percent reduction that took effect January 1, 2018, Florida’s overall rate level will be nearly 25 percent lower in 2019. To offset this revenue loss, insurance companies may begin auditing employers to make sure employees have been assigned the correct job classification code.

Classification codes are used to categorize employees based on the type of work they do. Each code is assigned a rate that reflects the relative risk associated with that type of work. A higher risk means a higher rate, which ultimately means a higher premium.

A car dealership, for example, may have employees classified as salespersons. This may change if an audit reveals that these ‘salespersons’ also work in the dealership’s parts department. The rate used to calculate premiums for non-salesperson employees is nearly five time higher.

It’s unclear how aggressive insurance companies may be in conducting audits, but it’s something employers should be aware of. Please contact us if you have any questions about employee classification codes or want to discuss ways to lower your workers’ compensation insurance premiums.

Workers’ Compensation 101: What Does Employers Liability Insurance Cover?

Did you know that a standard workers’ compensation insurance policy has more than one part? It’s true, check for yourself. Part One Workers Compensation Insurance provides indemnity and medical benefits that employers are legally required to provide employees who are injured on the job. You probably knew that already.

But, if you keep reading, you will see that Part One is followed by…Part Two Employers Liability Insurance. What could that possibly cover?

Part Two of a standard workers’ compensation policy covers employers for liability arising out of an employee’s work-related injury, death or disease that is not otherwise covered under a state’s workers’ compensation laws. Unless otherwise excluded under the policy, Employers Liability Insurance will typically respond to a variety of claims that stem from an employee’s work-related injury, including the following common claims.

Third-Party Over. Despite providing workers’ compensation insurance, an employer may end up being held indirectly liable for an employee’s workplace injury. Third-party over claims occur when: 1) an employee sues a third-party to recover damages for their workplace injury; and 2) that third-party then turns around and attempts to hold the employer responsible for the employee’s lawsuit.

For example, assume an employee injured by workplace machinery sues the machine’s manufacturer for damages. A third-party over situation would occur if the manufacturer tries to recover money it paid to the employee by suing the employer for negligently failing to maintain the machinery.

Loss of Consortium. Consortium generally refers to one spouse’s legal right to the company, affection, assistance, service, companionship and marital relations of the other spouse. The spouse of an injured employee may bring a claim for care and loss of services.

Consequential Bodily Injury. An injured employee’s spouse, child, parent or sibling may sue the employer for their own bodily injuries that are a direct consequence of the bodily injury suffered by the employee. Examples may include a spouse who develops migraine headaches or a parent who has a stroke induced by the stress caused by their child’s workplace injury.

Dual-Capacity. Depending on the circumstances, an injured employee may be able to sue their employer in a nonemployment-related capacity. For example, an employer may be sued as the manufacturer of the machinery that injured the employee or the landlord that failed to adequately maintain the premises.

Employers Liability Coverage is automatically included in standard workers’ compensation policies available in most states. But, North Dakota, Ohio, Washington and Wyoming only allow workers’ compensation insurance purchased from a compulsory state fund. Employers in these ‘monopolistic’ states must purchase stop-gap coverage, which is essentially an Employers Liability Coverage endorsement added to a General Liability policy.

Please contact us if you have any questions about Worker’s Compensation and Employers Liability Insurance Coverage. You can subscribe to our newsletter to receive regular insurance and risk management informational updates.

Workers’ Compensation Rates Decreasing in 2018: When Will Your Premiums Go Down?

Good news for Florida employers! Workers’ compensation insurance premiums are going down in 2018. The Office of Insurance Regulation approved a statewide overall premium decrease of 9.8 percent. This should provide welcome relief, particularly after last year’s 14.5 percent increase. The premium reduction for new and renewal policies started January 1, 2018.

Why are premiums going down?

Last year, the Florida Supreme Court decided two cases that were expected to increase workers’ compensation costs. The Office of Insurance Regulation responded by approving a 14.5 percent rate increase, but the actual impact of these cases turned out to be less than initially projected. Other marketplace factors also contributed to the premium reduction, including:

Reduced assessments;
Increases in investment income;
Declining claims frequency; and
Lower loss adjustment expenses.

When will premiums go down?

Most employers did not see lower premiums on January 1st. That’s because the premium calculation for an existing policy will not change until the policy renews in 2018. This means that premiums for policies that renew early in the year will go down before those renewing later.

Rather than wait, some are asking whether they can simply cancel their current policy and replace it with a new one that has an earlier effective date. However, this isn’t really necessary for most employers. Remember, those with early renewal dates are not saving more, they’re just saving sooner.

For those that simply don’t want to wait, this course of action may ultimately lead to a premium increase in 2018. Before deciding to cancel and rewrite a worker’s compensation policy, employers must consider a number of factors, such as:

Experience Modification. A new policy means a new Experience Modification Factor (“Experience Mod”). Experience Mods, which are used to make sure premiums reflect an employer’s actual loss experience, are calculated by comparing an employer’s loss history with that of similar employers operating in similar industries. A better-than-average loss history, typically over a three-year period, means a lower Experience Mod and lower premiums.

Insurance companies look at an employer’s loss history during a specific experience period, which can range from less than 12 months up to 45 months. The experience period is based on the policy’s effective date, so a different experience period will be used to calculate the Experience Mod under a new policy. If this new experience period covers new claims, your premiums will go up.

Short-Rate Cancellation Penalty. Insurance companies impose a penalty to discourage early cancellations. A short-rate cancellation lets the insurance company keep a larger percentage of the unearned premium if the policy is terminated before the normal expiration date. The manner in which the penalty is calculated often varies by insurance company and policy form. Depending on the circumstances, the penalty may be substantial and must be considered in any cost-benefit analysis.

Dividends. Some insurers offer policyholder dividends as an incentive for employers to implement safety programs that eliminate or reduce claims. The opportunity to collect a dividend, which is essentially a return of premium, may be lost if the policy is cancelled early.

Employers must also consider the time, effort and inconvenience of getting a new policy (applications, inspections, underwriting requirements, etc.). Some insurance companies may refuse to cancel and rewrite a policy, so changing the effective date would mean changing insurance companies.

The decision to cancel and replace your workers’ compensation policy needs to be based on more than just wanting next year’s premium reduction sooner than later. For most employers, this benefit will not be worth the expense.

Florida Supreme Court Ruling May Increase Workers’ Compensation Premiums

A recent decision by the Florida Supreme Court may soon have employers paying substantially more for workers’ compensation insurance. In Castellanos v. Next Door Company, the Court ruled that Florida’s mandatory workers’ compensation attorney fee schedule is unconstitutional. In response to this ruling, the National Council on Compensation Insurance (NCCI) proposed increasing Florida’s workers’ compensation rates by 17.1%.

Under Florida Statute 440.34, attorneys who successfully secure workers’ compensation benefits for injured clients may be awarded attorneys’ fees. However, any attorney fee award, which is based on the amount of workers’ compensation benefits secured, must equal:

20 percent of the first $ 5,000;
15 percent of the next $ 5,000;
10 percent of any remaining benefits that will be provided during the first 10 years after the claim is filed; and
5 percent of any benefits secured after 10 years.

In Castellanos, the Florida Supreme Court considered whether this mandatory fee schedule is constitutional.

Marvin Castellanos suffered an injury on the job. The workers’ compensation insurance company refused to authorize the medical treatment recommended by its own designated doctor and raised twelve affirmative defenses to avoid paying compensation. After a final hearing, the Judge of Compensation Claims (JCC) ruled entirely in Mr. Castellanos’ favor.

Mr. Castellanos’ attorney spent 107 hours working on the case and requested an award of attorneys’ fees calculated at $350 per hour. Despite finding this request to be reasonable and warranted, the JCC was required to follow Florida’s mandatory fee schedule. Based on the actual value of the benefits secured, Mr. Castellanos’ attorney was awarded fees in the amount of $164.54, or $1.53 per hour.

The Court noted that the mandatory fee schedule does not consider the reasonableness of a fee and does not permit the review of grossly inadequate or grossly excessive fees. “Without the ability of the attorney to present, and the JCC to determine, the reasonableness of the fee award and to deviate where necessary, the risk is too great that the fee award will be entirely arbitrary, unjust, and grossly inadequate.” Accordingly, the Court ruled that Section 440.34 is unconstitutional.

As a result, the statute’s immediate predecessor, which was construed to provide for a “reasonable” award of attorney’s fees, was essentially revived. Though the statutory fee schedule remains the starting point for calculating fees, claimants must now be allowed to present evidence to show that its application will result in an unreasonable fee.

Though the Court emphasized that its ruling does not mean that claimants’ attorneys will receive a windfall, insurance companies disagreed. On May 27, 2016, NCCI, which is a licensed rating organization authorized to submit workers’ compensation insurance rate filings on behalf of Florida insurance companies, submitted a proposed rate increase to the Office of Insurance Regulation (OIR).

According to NCCI, the first year impact of Castellanos will be a 15% increase in overall Florida workers compensation system costs. (The total proposed rate increase of 17.1% includes factors that are not related to Castellanos.) NCCI proposes applying the increased rates to new and renewal policies that are effective on or after August 1, 2016. NCCI also proposes applying the increased rates to all policies in effect on August 1, 2016 on a pro-rata basis through the remainder of the term of these policies.

If NCCI’s proposal is approved, Florida would have the highest workers’ compensation rates in the Southeast. The OIR plans to hold a public hearing regarding NCCI’s proposed rate increase in the coming months, so stay tuned.

Even if the OIR approves all or part of NCCI’s proposed rate increase, there are ways to lower workers’ compensation insurance costs, such as promoting employee safety and maintaining a safe work environment.

Please contact us if you would like more information about controlling workers’ compensation insurance costs.

Additional information is also available in our weekly Risk Management Newsletters.