We work quite a few of cases where the relationship between an employer and their workers comp insurance company has deteriorated to the point of name calling, posturing like wild beasts and threats of litigation often followed by actual legal proceedings. Let’s talk about what happens when a workers compensation insurance company throws their weight around.
Insurance companies have a lot of money. In today’s market place insurance carriers are not only making investment profits but many are also enjoying that rarest of events, an underwriting profit! When insurance companies are flush with cash a strange thing starts to happen. They start looking for more ways to make more money! And those ways typically run in tightening up their underwriting methods which include enhanced usage of outside and internal verification of premium generating issues. In other words, they get tough! They will focus on issues that put money in their pockets by implementing stricter audit guides and are more difficult in standing by decisions they make concerning their individual policyholders.
At our firm, we break down workers compensation problems, errors and mistakes into two basic groups, objective data and subjective data. Objective data consists of those items of fact such as payroll numbers, overtime numbers, credit and debit factors, experience rating factors, class code rates and all the math that goes into generating a final premium an employer pays. Subjective data consists of classification code determination and manual rule interpretation and implementation and of course there’s more.
Some of the largest cases where we’ve been involved revolve around subjective data issues. Classification code and manual rule disputes can be difficult to resolve. These types of errors are usually guarded by the group of individuals who have made some kind of ruling or have decided to stand by a specific decision. It’s these kind of situations that can become hard to handle and difficult to understand. They are also the kind of situations that when an insurance company digs their feet in and decides to defend their position, will be the most costly to prevail. Keep in mind that no one wants to be told by someone else that they’re wrong!!
Incorrect decisions made by an insurance company can have devastating effects on their policyholders. For example in a recent case we worked, an employer, when faced with a large additional premium audit bill from their insurance company because of an incorrect re-classification of employees, was forced to lay off many employees and re-configure their business while fighting with the insurance company about the decision. Of course the insurance company was unwilling to make any modifications or changes, until they were forced to by a governing authority and only long after the damage was done.
Don’t get me wrong! Not all decisions on subjective data cases made by insurance companies are incorrect. It’s just that those that are incorrect have the potential to ruin a business. It’s been done before and, I’m sure, will be done again.
A word to the wise. When faced with the situation where an insurance company has decided to take an unwavering stand to defend their position and that position puts your business in jeopardy don’t wait to seek out help! Time is not on your side! The quicker you act to follow through on formal appeals and, if necessary, litigation, the better chance your business may have to survive the process.
Hope this helps you out and thanks for reading!