We were recently contacted by a prospective client seeking advise on an audit situation that was way out of hand! The client was being sued by their insurance company for a past due balance. Here’s the scenario…
- The client had a workers compensation policy 3 years ago with insurance company “A.” That policy ran its normal course but at the end of the policy, insurance company “A” did not perform an audit. Probably because the premium was very low or they may have sent a self audit form that was never returned and the company just passed on taking any action on the non-return.
- The insurance agent representing the client moved their coverage to another insurance company for the next two years.
- Then the insurance agent moved the coverage back to the original insurance company “A” because it was cheaper. Upon review of the application by “A’s” underwriter it was determined that the client never had an audit performed on the original policy 3 years ago.
- Insurance company “A” then ordered an audit for the original policy period and after the audit was completed they sent an additional premium due bill to the client for approximately $10,000….for the original policy period!
So we received a call from this client asking if the insurance company could do this, audit their books and bill them 3 years later…and the answer was yes…the insurance company was allowed to perform an audit for a period of up to 3 years after the expiration date of the original policy. The audit was conducted about 2 1/2 years later and was allowed
Now for the kicker! The client contacted us on the day they were going to trial for the collection of the $10,000 premium due. You see…the audit and subsequent additional billing happened almost one year ago!! Not exactly the best time to ask for help!! At this point they were in the hands of the judge…and most judges will not look favoribly when you had taken no action prior to the court date!
You see, by not taking action sooner, the client had removed our ability to verify the original audit for accuracy, to properly dispute the audit and to work with the insurance company correcting any errors or mistakes that may have been found. Instead it’s in litigation…never a place you want to be!
Lesson Learned: Don’t wait to have a workers compensation audit reviewed…time is not on your side!