We received a call from an insurance agent based in Missouri asking for help. His client was being charged additional premium on his policy. Here’s what happened…
This employer operates his business as a LLC and in Missouri LLC members are included under coverage as indicated by the workers comp statute for this state but have the option of excluding themselves. The employer is a drywall contractor and operates a small crew of staff employees. As we all know the contracting industry has been severely depressed over the last few years but more work is slowly coming around. Over the past winter this employer cancelled his previous workers comp policy as he had no work to justify or sustain the cost of continuing a policy.
When spring came around and he had some work lined up he contacted his insurance agent and made arrangements to get a workers comp policy back in place. The agent completed the application and placed the policy with the assigned risk plan. The employer paid the premium as instructed and the policy was issued by the insurance company. So far so good!
But a few months later he received another premium bill from the insurance company for approximately $2,500! He contacted his agent and the agent pulled the employers original application and reviewed the information submitted to the insurance company. On the application both the employer and agent had clearly indicated that the employer, the LLC member, wished to be excluded from coverage. It was understood by both that the employer was excluded from the premium calculation.
When the insurance company was contacted they indicated they had not received a signed state department of insurance approved form from the insured. With a quick check into the rules and statutes of Missouri we found their statute states: “members may individually elect to reject such coverage by providing a written notice of such rejection on a form developed by the department of insurance…to the limited liability company and its insurer.”
In lieu of this required rejection form, the insurance company interrupted this to mean they would have had to provide coverage to the LLC member…and we all know that when an insurance company has to provide coverage they will charge a premium.
The insurance company went on to explain that when on an application it’s indicated a LLC member wishes to reject coverage it’s their practice to include with the issued policy a copy of the rejection form for the employer to complete and return. And in this case the employer did not even open the mail containing the issued policy and form he received from the insurance company.
A couple of points of consideration:
- Even though the clear intention was to reject coverage, the proper form was not submitted causing additional premium charges;
- Agents help your clients understand the policy and what their obligations may be;
- A failure of communication; agent and employer;
- Open your mail! …Read the contents!
The result…the insurance company would not retroactively exclude the LLC member but they did accept the rejection form going forward.
Our company is an independent workers compensation consulting firm. We help employers, insurance agents, company employees and auditors experiencing workers compensation premium issues work through their problems to a satisfactory outcome. Be sure to contact our company or visit our website for more information on the services we provide!
Hope this helps you out! Thanks!