Excess and Umbrella Insurance Explained

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Excess and umbrella liability are common terms in the general liability, commercial auto, and employer’s liability insurance industries. Because the two policy types can fit perfectly into different branches of the insurance industry, many people confused them one for another. While they are sometimes used interchangeably, a closer look at the two will clearly show that excess and umbrella policies are not one or the same.

Excess Liability Insurance Defined

Excess liability, in its purest form, provides coverage above the limits of an underlying liability policy. Its primary purpose is to add some layers of protection if the underlying policy is exhausted. If for instance you have an insurance policy that only covers $500,000 damages, and there is a lawsuit where you are liable of $700,000 loss, you will be allowed to file claims for the excess liability of the remaining $200,000.

Umbrella Insurance Defined

Umbrella insurance is a type of policy that provides coverage beyond and above the standard liability limits. It serves almost the same purpose as excess liability insurance, but with some more inclusions.

To enjoy an umbrella insurance coverage beyond the underlying policy, you will need to pay self-insured retention (SIR). A SIR is the dollar amount agreed upon in liability insurance which you must pay before an insurance company responds to the loss. Once you have paid to the tune of the SIR, your insurer will take on the rest.

What is an Underlying Policy By the Way?

The underlying policy is the insurance coverage set at the initial stage of a policy to protect against specified risks and losses. Secondary policy provisions like excess liability and umbrella policy come into play when the damage is more than the established coverage.

What Are the Key Differences Between Excess and Umbrella Policies?

The major difference between the two is as follows:

Excess Liability

It provides you with additional limits to the underlying policy without affecting the actual terms of the contract. For example, if your excess liability is for general liability insurance, you cannot use it for another policy. Keep in mind though that this may not be the case if a policy includes additional exclusions.

Umbrella Insurance

On the broader (plus side, if you will), umbrella insurance can provide additional coverage in cases outside the scope of the underlying policy.

Why You Need an Umbrella or Excess Liability Insurance

With the increased rate of lawsuits emanating from liability and damages, there has not been a time when extra coverage is more needed. Lawyers are now charging hundreds of dollars per hour. Furthermore, there are financial responsibility laws that hold people accountable for damages and injuries caused by their businesses or properties, in almost all the 50 states. Most basic insurance policies have limits. Without extra coverage, your business could experience a bankruptcy as a result of loss from just one lawsuit. You may also lose your personal assets along the line. It is, therefore, a necessity to have some levels of buffers in your risk management approach.

Fact Sheet: Service Use among Medicaid & CHIP Beneficiaries age 18 and Under during COVID-19

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Sep 23, 2020 | Medicaid & CHIP

Overview                                                                                                                                          

To monitor the impact of the COVID-19 public health emergency (PHE), the Centers for Medicare & Medicaid Services (CMS) is releasing its first ever preliminary data snapshot focusing on the impact of COVID-19 on service utilization for children age 18 and under enrolled in Medicaid and the Children’s Health Insurance Program (CHIP). This analysis is essential to understanding the broad ranging impacts of COVID-19, as Medicaid and CHIP cover nearly 40 million children, including three quarters of children living in poverty[1] and many with special health care needs that require health services.[2]  The preliminary findings contained in this data snapshot show that, while some data suggest that children may have less severe illness from COVID-19 compared to adults, their service utilization across many key domains, such as primary, preventive, dental and mental health services, has dropped over the past few months.

CMS’s release of COVID-19 data for children enrolled in Medicaid and CHIP is a major step toward sharing timely data on some of the nation’s largest and most important health insurance programs. These results are essential for ensuring not only robust monitoring and oversight of Medicaid and CHIP, but also understanding the impact of the PHE on children and highlighting the distinct result COVID-19 has had on children’s service utilization. By using these results, CMS, states, and other key stakeholders can help drive better health outcomes for some of our nation’s most vulnerable beneficiaries and ensure that children receive the care they need. 

Findings                                                                                                                    

The preliminary data shows that beneficiaries age 18 and under enrolled in Medicaid and CHIP had relatively low treatment rates due to COVID-19. Although more than 250,000 children enrolled in Medicaid and CHIP were tested for COVID-19 through June 2020, only about 32,000 received treatment for COVID-19 and fewer than 1,000 were hospitalized for COVID-19 through the end of May.

However, even though treatment rates for COVID-19 in children appear lower than for other age groups, while enrollment in Medicaid and CHIP has simultaneously increased, we have observed a decline in service use among this population across a number of key domains. When compared to data from the same time period last year (March through May 2019), preliminary data for 2020 shows 1.7 million (22%) fewer vaccinations for beneficiaries up to age 2, 3.2 million (44%) fewer child screening services, 6.9 million (44%) fewer outpatient mental health services even after accounting for increased telehealth services, and 7.6 million (69%) fewer dental services.

Data Sources & Definitions                                                                                                                 

Medicaid and CHIP providers, managed care agencies, and Pharmacy Benefit Managers submit administrative claims data to state Medicaid and CHIP agencies for processing. Those state agencies subsequently submit the data to CMS on a monthly basis via the Transformed Medicaid Statistical Information System (T-MSIS), a uniform, national data system for Medicaid and CHIP. Because T-MSIS submissions are difficult to analyze due to their large size and complex relational structure, CMS developed the research-optimized T-MSIS Analytic Files (TAF) to facilitate the analysis of Medicaid and CHIP data. Additional information about TAF can be found here. This data snapshot utilizes the 2020 TAF to monitor ongoing outcomes related to COVID-19, including measures of Medicaid and CHIP enrollment, COVID-related treatment, and service use. Due to claims submission lags related to state processing and submission via T-MSIS, this analysis primarily focuses on service utilization and health outcomes through the end of May 2020. 

CMS measured enrollment, forgone care, and COVID-related treatment using the following logic:

Enrollment: This analysis includes records for every beneficiary who has any Medicaid or CHIP enrollment record in a given month and is under the age of 19, regardless of the scope of their benefits.

Vaccinations: Vaccinations are identified CPT codes. The vaccines included in this analysis are DTaP, Polio, MMR, Hepatitis B, Hib, Pneumococcal conjugate, Chickenpox, Hepatitis A, and Rotavirus.

Child screening services: Child screenings are identified by two types of codes in claims. The first type is Current Procedural Terminology (CPT) codes that are specific to visits by new or established patients (99381-99385 or 99391-99395) and to initial hospital or birth center care for newborns (99460, 99461, 99463). The second type is general CPT codes for new (99202–99205) or established (99213–99215) patients along with a diagnosis code indicating that the service was provided to a child younger than 19 (e.g., Z00.110 Health examination for newborn under 8 days old).

Dental Services: Dental services are defined on the basis of the Current Dental Terminology (CDT) and CPT code groups from standard annual reporting of the states’ participation in the Early and Periodic Screening, Diagnostic and Treatment program (CMS-416).

Mental health services: Mental health services are identified by claims in which the diagnosis is a mental health condition. In addition to diagnosis, the services are grouped on the claim by type, with this analysis focusing on outpatient claims.

Telehealth: Telehealth is identified through a combination of procedure codes and procedure code modifiers.

COVID testing services: All COVID-19 testing services are grouped into three categories: diagnostic testing, antibody testing, and specimen collection. Diagnostic testing indicates whether an individual has COVID-19. Antibody testing is designed to detect antibodies produced in response to being previously exposed to COVID-19. Specimen collection is the process of obtaining the samples that are necessary to test for COVID-19. Diagnostic testing is identified via Healthcare Common Procedural Coding System (HCPCS) codes U0001, U0002, U0003, and U004 and CPT code 87635. Antibody testing is identified via CPT codes 86328 and 86769. Specimen collection is identified via HCPCS codes G2023 and G2024.

COVID-19 treatment: We use the following International Classification of Diseases (ICD), Tenth Revision (ICD-10), diagnosis codes to identify beneficiaries who received treatment for COVID-19:

  • B97.29 (other coronavirus as the cause of diseases classified elsewhere) – before April 1, 2020
  • U07.1 (2019 Novel Coronavirus, COVID-19) – from April 1, 2020 onward. 

Although CMS does use lab claims for identifying COVID-19 treatment, CMS does not receive lab results from states and cannot determine whether a lab test was positive. Therefore, Medicaid & CHIP COVID-19 cases are only identifiable in TAF data when there is a corresponding COVID-19 related service.

Key Considerations                                                                                                                          

Readers should use caution when interpreting these results as CMS collects Medicaid and CHIP data for programmatic purposes only, not for public health surveillance. Given the complex process of states collecting, processing, and transmitting claims via T-MSIS, it can take nearly 7 months for CMS to receive 90% of claims. Therefore, this delay between when a service occurs and when it is reflected in TAF, or the “claims lag,” may impact the accuracy of the results. The length of the lag depends on the submitting state, claim type, and delivery system. It is possible that there is a longer claims lag due to the pandemic. Further, in addition to claims lag, states vary widely in terms of the completeness and accuracy of their T-MSIS data submissions. Additional information about state data quality can be found here and here. 

Next Steps                                                                                                                                         

CMS is committed to working with our state partners to help close these gaps in Medicaid and CHIP children’s healthcare, and we will continue to monitor both the direct and indirect impacts of COVID-19 on the Medicaid and CHIP populations using TAF data.

### 

 

[1] Cornachione, Elizabeth, Robin Rudowitz, and Samantha Artiga. 2016. Children’s Health Coverage: The Role of Medicaid and CHIP and Issues for the Future. Kaiser Family Foundation. Available at: https://www.kff.org/report-section/childrens-health-coverage-the-role-of-medicaid-and-chip-and-issues-for-the-future-issue-brief/

[2] Musumeci, MaryBeth and Priya Chidambaram. 2019. Medicaid’s Role for Children with Special Health Care Needs: A Look at Eligibility, Services, and Spending. Kaiser Family Foundation. Available at: 

                                                                                                                                            

Source: Centers for Medicare & Medicaid Services (CMS).

https://www.cms.gov/newsroom/fact-sheets/fact-sheet-service-use-among-medicaid-chip-beneficiaries-age-18-and-under-during-covid-19

Centers for Medicare & Medicaid Services (CMS) issued the above News Release on September 23, 2020.

William M. Kelly, M.D., Inc And Omega Imaging, Inc. Agree To Pay $5 Million To Resolve Alleged False Claims For Unsupervised And Unaccredited Radiology Services

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Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Wednesday, September 9, 2020

William M. Kelly, M.D., Inc And Omega Imaging, Inc. Agree To Pay $5 Million To Resolve Alleged False Claims For Unsupervised And Unaccredited Radiology Services

William M. Kelly Inc. and Omega Imaging Inc., together, operate 11 radiology facilities in Southern California, have agreed to pay the United States $5 million to resolve allegations that they violated the False Claims Act (FCA) by knowingly submitting claims to Medicare and the military healthcare program, TRICARE, for unsupervised radiology services and services provided at unaccredited facilities, the Department of Justice announced today.

“Today’s settlement demonstrates the department’s unrelenting commitment to protect the public fisc and patient safety,” said Acting Assistant Attorney General Jeffrey Clark of the Department of Justice’s Civil Division.  “The department will aggressively pursue unscrupulous healthcare providers who cut corners that could jeopardize the health and safety of Medicare and TRICARE beneficiaries.” 

“Patients rightly expect that medical providers follow the proper procedures and protocol when administering complex treatments to ensure patient safety,” said Timothy B. DeFrancesca, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Working with our law enforcement partners we remain steadfast in our commitment to uphold the integrity of government health programs.”

The settlement resolves allegations that the defendants submitted claims for CT scans and MRIs involving contrast injections that were not properly supervised by a physician.  Applicable program rules require a physician to be present in the office suite when a patient undergoes an examination that involves the administration of intravenous contrast material.  The defendants allegedly performed and billed for these procedures when no supervising physician was present in the office suite.  The settlement also resolves allegations that a certain number of the defendants’ facilities lacked accreditation.

Contemporaneous with the settlement, William M. Kelly, Inc. and Omega Imaging Inc. entered into a three-year Integrity Agreement (IA) with the Department of Health and Human Services Office of Inspector General requiring, among other things, the implementation of a risk assessment and internal review process designed to identify and address evolving compliance risks.  The IA requires training, auditing, and monitoring designed to address the conduct alleged in the case.

The settlement, which was based on the defendants’ ability to pay, resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the FCA by Syd Ackerman, who was formerly employed by the defendants.  The FCA permits private parties to sue on behalf of the government for false claims and to receive a share of any recovery.  The FCA permits the United States to intervene in such a lawsuit, as it did in part here.  Mr. Ackerman will receive approximately $925,000 of the settlement proceeds.

This settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the Central District of California; the Department of Health and Human Services, Office of Counsel to the Inspector General and Office of Investigations; the Defense Criminal Investigative Service; and the Defense Health Agency Office of General Counsel. The qui tam case is captioned United States ex rel. Syd Ackerman v. William M. Kelly, M.D., Inc. and Omega Imaging, Inc., No. EDCV 13-02195 JGB (DTBx) (C.D. Cal.). 

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Topic(s): 
False Claims Act
Component(s): 
Civil Division
Press Release Number: 
20-900
Updated September 14, 2020

                                                                                                                                            

Source: U.S. Department of Justice.

https://www.justice.gov/opa/pr/william-m-kelly-md-inc-and-omega-imaging-inc-agree-pay-5-million-resolve-alleged-false-claims

U.S. Department of Justice issued the above News Release on September 9, 2020.

Workers Compensation in the United States: The Background History

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Workers Compensation in the United States: The Background History 

The idea of providing workers with sufficient protection as well as compensation for the injuries or illness that occurs at the workplace was first introduced at the beginning of the 20th century with the emergence of the trade union movement. The increasing awareness among the general people, poor working condition in various sectors along with the massive financial impacts caused by the injuries and illness of the workers are some of the main issues that led to the emergence of workers compensation insurance.

It is to be mentioned that the workers compensation insurance is the oldest social insurance program in US which is older than the unemployment compensation and social security.

California along with most other states adopted the Workers Compensation laws during the 1910s. The Workers Compensation law works based on the no-fault system where in order to receive the benefits from Workers Compensation for any job related illness or injury, it is not required for an injured worker or employee to come up with proves that his or her illness was caused by another individual.

In California, it is important for both the employer and employees to have a clear understanding about how the Workers Compensation insurance works and the laws involved with it as the state of California ensures protection for each and every Californian through the benefits of Workers Compensation. 

Benefits that an Individual May Receive Under a Workers Compensation Policy

The injured workers receive various types of benefits from their Workers Compensation Policies based on the circumstances of their illness or injuries. There are six basic types of benefits available under Workers Compensation in the country which includes:

–          Medical care

–          Temporary disability benefits

–          permanent disability benefits

–          vocational rehabilitation services

–          supplemental job displacement benefits and

–          Death benefits

 

Medical Care 

According to law, it is the right of an injured worker to receive all kind of medical assistance which s/he reasonably requires to overcome a work related illness or injury. Under the medical care facility, a worker may receive different types of medical cares including chiropractic treatment, dental care, hospitalization, laboratory services, physician services, physical restoration, physical therapy, prescriptions, x-ray and so on. The type of treatment that the injured worker will receive is determined by the treating physician who determines it based on the injury or illness. This can be subject to applicable treatment guidelines.

In general, the employer takes all the responsibilities of arranging proper medical treatment for an injured worker for the first 30 days calculated from the day the injury or illness is reported. Once the 30 day period is over, the employee can choose a particular physician or treating facility based on his/her preference. However, if the employee has a personal physician and wants him/her to deal with the treatment, then that particular physician can be in charge of the treatment from the date of the injury or illness. It is to be mentioned that the employee has to inform his/her employer about the physician before the injury or illness takes place. However, the choice of physician for the treatment varies if the employer and the employee go for a Health Care Organization (also known as HCO).

 

First Aid Treatment 

It is mandatory for all employers to ensure first aid treatment for their employees who gets injured or ill. The California Department of Insurance (CDI) jointly with the Department of Industrial Relations, Division of Workers Compensation want to remind all employers along with physicians, insurance carriers and self-insurers the importance of complying with the Section 6409(a) of the California Labor Code.

Under the section 6409(a), it is a requirement for a treating physician to file a “Doctor’s First Report of Injury” (DFR) for a injured employee with the claims administrator for each and every work injury or illness, even first aid cases which does not involve any lost time of work. Although “first aid” exceptions available in the labor code as far as the Employers Report (Form 5020) and the Employee Claim Form (DWC-1) are taken under consideration, no such exceptions are there for the DFR. It is the responsibility of the insurance carrier or the employer (if he/she is self-insured) to forward the DFRs to the Department of Industrial Relations and there is no “first aid” exception available to this statue.

According to the California Department of Insurance and Department of Industrial Relations, in cases where some medical providers along with the employers provides the employer with the authority to determine how the injuries are going to be classified by the physicians, possibilities are there that improper arrangements will take place. In some cases and based on the request of employers, physicians forward the DFRs to the employers only, not to the insurance carriers. This sort of arrangements may take place even when it is very much clear that the injury is beyond first aid.

Employers often find these arrangements attractive as they are advertised as a technique of reducing the premiums or keeping them at a lower level. These types of marketing activities are considered improper and can also contribute to premium fraud related possible criminal violations and the fraudulent denial of Workers Compensation benefits for injured employees.

 

Temporary Disability 

According to the law, an employee becomes eligible for receiving the temporary disability benefits if s/he is unable to report for duty within three days of the injury or illness. The temporary disability benefit allows the employee in that case to replace the wages lost due to the illness or injury. However, it is to be mentioned that the temporary disability benefits will be payable only after a physician verifies that the employee has become unfit to attend his job due to a work related illness or injury.

Usually the benefits replace as much as two-third of the lost wages, up to the current maximum prescribed by the law. Until an employee becomes able to get back to his or her job or until his/her condition turns permanent and stationary (according to the physician who is treating the employee), the benefits will be payable in every two weeks. According to the present law, the benefits are limited to two years maximum which can be extended to four years considering the type of injury or illness.

Permanent Disability

An employee or worker may become eligible for receiving permanent disability benefits if his/her job related illness or injury leads to a permanent disability. The amount (percentage) that an employee will receive in that case will depend on a number of factors which includes:

  1. extent of the injury or disfigurement
  2. the diminished income capacity of the employee for future
  3. type of work that the employee was involved in
  4. age of the employee, and
  5. the date when the injury occurred

It is to be mentioned that modifications were made to the Workers Compensation laws recently based on which the Department of Workers Compensation (DWC) may include new regulations which could play important role in determining the permanent disability benefits for the workers. According to the present law, the permanent disability benefits become payable in every two weeks until it hits the highest amount or a settlement takes place.

The assessment of the permanent impact of the injury along with the permanent Disability Rating Schedule is used to calculate the percentage of permanent disability. Details of the Permanent Disability Rating Schedule can be found in the website of the Department of Industrial Relations.

A Qualified Medical Evaluator (in short QME) or the physician who is treating the employee usually assesses the permanent impairment and limitations of the employee. It can be done by an Agreed Medical Examiner (AME) as well if an attorney represents the injured employee. The QME is appointed and regulated by the Medical Unit of Division of Workers Compensation.

Assessment of a Permanent Injury: How to Deal with Disagreements? 

When it comes to the assessment of the permanent injury, disagreement and confusion among the involved parties is not anything uncommon. The employee who is going through the assessment may disagree with the opinion of the physician. If such an incident takes place in case of an employee who is not being represented by an attorney, then DWC Medical Unit may assign a physician based on the employee’s preference who will perform a separate assessment.

Now if the worker or employee is being represented by an attorney then in that case the parties are required to take initiatives to agree on a physician who will be responsible for the assessment. If the parties fail to agree on that issue, it is the Medical Unit of DWC, which will appoint a QME panel formed by three members. Under this system, each party holds the right to stroke off one physician from the QME panel narrowing the selection down to a single physician. If the assessment turns out to be different then the amount of permanent disability for the employee will be decided based on negotiation or litigation if it is necessary.

Vocational Rehabilitation

(for employees injured prior 01/01/04)

Injured workers, who are unable to return to the type of work they used to do before suffering the injury are eligible for receiving the Vocational Rehabilitation Services. This service includes developing an appropriate plan, the cost required for the training (if any training is necessary) and an allowance for maintenance while taking part in the rehabilitation program.

The employer and the injured employee jointly select a rehabilitation counselor who determines if a vocational rehabilitation is going to be feasible for the employee. However, the selection process can be initiated only after the employee is evaluated and it is determined that s/he is no longer capable enough to return to the previous type of work that s/he used to do. The whole idea of a rehabilitation plan is to assist an injured worker to become capable of self-reliant as much as possible within a reasonable period of time.

The maintenance allowance payable to an injured employee is designed in such a way that it covers as much as two-third of his/her income for the lost wages, something that is similar to the temporary disability benefits. It is to be mentioned that by law, the maximum for the maintenance allowance is lower in comparison with the maximum payable by temporary disability.

An injured employee may consider supplementing his/her maintenance allowance with advances from the permanent disability benefits up to a limit where s/he receives the equal amount at a weekly basis which is received by a worker under the temporary disability benefits. Currently the total cost of rehabilitation is determined by law for the employees who got injured on or after 01/01/04.

The workers who have suffered illness or injuries on or after 01/01/03 and have legal representation can settle the rehabilitation in a lump sum. It is to be mentioned that vocational rehabilitation is not applicable for workers with dates of injuries after 01/01/04.

Supplement Job Displacement benefit

(for workers who got injured after 01/01/04)

The Supplement Job Displacement Benefit is in effect a nontransferable voucher for retraining related to education and/or enhancement of skills. This benefit is payable to a school that is state approved or accredited and for an employee who got injured on or after 01/01/04. The following issues are taken under consideration to determine whether an injured worker is eligible for receiving this benefit or not:

–          Whether the injury led to permanent disability (the worker will only receive this benefit if his/her injury leads to permanent disability)

–          Whether the injured worker is unable to report for duty within a 60 day period once the temporary disability ends (if a worker is unable to return to work within this period then s/he will be eligible to receive this benefit

–          Whether the employer is offering any alternative or modified job for the injured employee. If not, then it qualifies the injured worker for the benefits.

The highest voucher amount is determined by law and the amount will vary based on the extent of permanent disability of the worker/employee.

Death Benefits

In cases where a worker encounters with fatal injuries while being on duty, the reasonable costs for the burial is paid up to the present maximum- something that is set by the law. In addition to this, for a certain period, support payments may be provided to the existing dependents that are eligible for it. Usually these benefits are paid by following the same rate structure that is followed in case of the maximum temporary disability benefit. The amount that the dependents will receive under the death benefit will be determined based on the number of dependents and their type of dependency (whether they are totally or partially dependent).

Coverage in Workers Compensation Policy: How is this Structured? 

It is the Part One of a Workers Compensation policy under which the workers compensation coverage is provided. Under the Part One, an insurance provider agrees to make payments to an injured worker for all benefits and compensations without any delay. The Workers Compensation Law or the State Laws or laws of the states that are included in the policy’s Declarations page imposes these payables on the employer.

Workers Compensations insurance is a something that is seen as the exclusive remedy for employees who suffers work related injuries or illness. This means, the employer takes the full responsibility for all worker injuries and it is the Worker Compensation benefits that turns out to be the remedy and the only source of funds for the injured workers. It is to be mentioned that an employee covered by the Workers Compensation cannot sue his/her employer for the work related damages that s/he may suffer.

Employers Liability insurance

The Employers Liability insurance may provide vital coverage as well, although the Workers Compensation is considered as the exclusive remedy for the injured workers who suffers work related damages. Employers Liability is provided under the Part Two of a Workers Compensation and Employers Liability Policy. An employer receives the necessary protections under the Employers Liability Part Two if the illness or injury of a worker is not related to his/her work. Workers Compensation law does not cover the occupational injuries, which does not take place in the course of employment. This is why these injuries cannot be compensated under the Workers Compensation Part One. Individuals are advised to contact with a licensed commercial broker-agent to learn more about the Employers Liability coverage as a part of their Workers Compensation policy.

People who are Required to Buy Workers Compensation Insurance

Under the California Labor Code Section 3700, it is mandatory for the Californian employers to offer Workers Compensation benefits for the worker/employees. An organization with one or more employees is obligated to satisfy the requirements of the law.

Workers Compensation for Sole-Proprietor

In some cases a sole-proprietor or business owner may go for Workers Compensation insurance for himself/herself. In that case it is important to make sure that the inclusion of that individual in the Workers Compensation policy is stated clearly or it has to be included in the form of an endorsement to the policy. However it is to be mentioned that a Workers Compensation policy is seen as a liability for the employers considering the fact that under this policy an employer is required to take the complete liability for an injured or ill employee. This is why Workers Compensation policy may not be the best choice for a sole-proprietor.

Alternatives of Workers Compensation insurance that a sole-proprietor may consider includes: disability income, health and/or life insurance. Those who are interested to purchase such insurance can get more information regarding this from a licensed personal lines broker or commercial broker agent.

Workers Compensation Coverage for Directors and Executive Officers

In case of the Workers Compensation coverage, the executive officers along with the directors of a company are required to be included in the coverage unless the executive officers and directors hold full ownership of the firm. In that case, the directors and executive officers may consider electing themselves out from the coverage. In case of a fully owned enterprise, the issues regarding the inclusion of the directors and officers should be discussed with a licensed commercial broker-agent.

It is clearly defined in the California Labor Code Section 3351 that who is an employee, which makes it easy to identify the individuals who may come under the Workers Compensation policy of a company. It is always recommended that a company develops good professional relationship with a broker-agent who is reliable and competent regardless of whether it is a corporation, partnership or sole-proprietorship. The right broker-agent can help an organization to have a clear understanding of various issues involving the coverage eligibility as well as the current options depending on the organization model of the business.

How to buy a Workers Compensation Insurance

In order to fulfill legal requirements, an employer needs to buy a Workers Compensation insurance from insurance company that holds the license. Another option can be the State Compensation Insurance Fund (SCIF). An employer can go for the option of “self-insure” as well under the Workers Compensation.

In order to purchase the Workers Compensation Insurance, an employer may contact with a reliable commercial broker-agent who will provide all the necessary information about the insurance, SCIF and self-insurance. In addition to this, the commercial broker-agent can assist the employer to buy the insurance from a licensed insurance company.

Information regarding the licensed insurance companies that are offering Workers Compensation insurance and online rate comparison of the top 50 Workers Compensation insurance providers can be obtained from the official website of the California Department of Insurance (CDI). The website address is: www.insurance.ca.gov.

So beside talking with a reliable commercial broker-agent, an individual who is interested to learn more about Workers Compensation policy can have access to the necessary information right from the comfort of the house simply by surfing in the internet.

State Compensation Insurance Fund (SCIF)

State Compensation Insurance Fund or (SCIF) is a state-run organization that focuses on transacting the Workers Compensation on a non-profit basis. The private insurers are the competitors of SCIF and this organization is considered as the last remedy when the private insurers refuse to provide Workers Compensation Insurance for a company. A business organization can directly contact with SCIF or through a licensed commercial broker-agent if it is willing to go for an insurance policy of SCIF.

Workers Compensation Self-Insurance Plans

It is mandatory for a firm to get a certificate from the California Department of Industrial Relations, Office of Self-insurance Plans if it is interested to become self-insured. To obtain a certificate of consent to self-insure, a private employer is required to post security. Stable and considerably large employers may find self-insurance as an appropriate option. Those who are interested about Workers Compensation Self-Insurance Plans are advised to contact the Department of Industrial Relations for more information.

Consequences of Not Purchasing Workers Compensation Insurance

Deliberately failing to provide Workers Compensation insurance for the employees can have serious consequences for an employer in the United States. In California where Workers Compensation is must for every company, failing to provide it for the employees can lead to the following consequences: 

Stop Order 

It is considered as a violation of the California Labor Code if an employer fails to purchase Workers Compensation insurance. Companies that are found illegally uninsured for the Workers Compensation can face “stop order”. The Director of the Department of Industry Relations holds the authority to issue stop order against such organizations and once an organization get a stop order, it has to suspend all kinds of business activities until it obtains Workers Compensation insurance.

Fine

In addition to the stop order, an uninsured company can be fined as well if normal investigation finds it guilty of not obtaining the Workers Compensation insurance illegally. An uninsured firm can be found guilty if an injured employee files for claim with the Uninsured Employers Fund as well. According to the law, a company may have to pay as much as $10,000 in fine if it fails to comply with the stop order while it can be fined by $1000 per worker for failing to carry the Workers Compensation insurance.

Prosecution

According to the law, an employer can be prosecuted for insurance fraud if s/he deliberately fails to provide Workers Compensation Insurance to the employees. In addition to this, the employer opens himself/herself up to the liability lawsuits from the injured employees if the firm has no Workers Compensation insurance for the workers. The exclusive remedy protection is not going to be applicable if Workers Compensation insurance was not in force during the time when a worker got injured.

Uninsured Employers Fund 

An injured employee holds the right to file claim with the Uninsured Employers Fund for his/her work related injury if the employer does not offer the Workers Compensation Insurance unlawfully. The injured worker can seek assistance from the Uninsured Employers Fund if the employer fails to pay the compensation or post a bond in order to make the payments for the injured worker. In such cases, the Uninsured Employers Fund takes the responsibilities to deal with the Workers Compensation claim. The Uninsured Employers Fund takes necessary steps to recover the amount (if any) paid on behalf of the uninsured employer.

Subsequent Injuries Fund

The Subsequent Injuries Fund may provide additional compensation to an injured worker who already has permanent disability and later got affected by a subsequent injury or illness which is related to his/her work. In order to be qualified, the combined permanent disability has to be at least 70 percent and the additional eligibility requirements must be met.

It is to be mentioned that the employers don’t have to assume the liabilities under Workers Compensation for the combined disability of an injured employee. The employer remains liable for only that portion of the compensation which an employee is eligible to receive for the injury that s/he suffered later. 

Calculating the Workers Compensation Premium

Classification

Calculation of the Workers Compensation premium is done on the basis of how an organization classifies its employees where their specific duties as well as the assigned rate with each corresponding employee classification are taken under consideration. In most cases, the Workers Compensation Insurance Rating Bureau (WCIRB) carries out the task of developing and assigning the classifications.

When it comes to rating a particular workers compensation policy, it is the WCIRB developed codes that are used by the Workers Compensation insurance providers to carry out the task. However in some cases the insurance providers may come up with their very own system to classify and send it over to the CDI for approval. But this does not happen that often considering the fact that submitting a separate workers compensation classification system requires maintaining strict standards.

Employers can get detail information about different issues regarding the workers compensation insurance including the classification and modification of experience as well as the rating from a policyholder ombudsman who is assigned by the WCIRB.

Open Rating

For each and every occupational classification code, a specific rate is assigned by the Workers Compensation insurance providers and these rates are required to be filed with the CDI. At present, there is an “open” rating system available for the Californian Workers Compensation insurers who operate under that system.

According to the open rating system, a company determines the rates to sufficiently cover the losses as well as costs in different classifications (the occupational business class) based on their capability. Open rating makes it as a requirement for all Workers Compensation insurance providers to file their rates along with all the applicable supplementary rate information to the CDI. There are various factors that are taken under consideration for approving the rate. Among them, rate adequacy is considered as a vital one. Adequate rates are also important for the insurers to obtain right surplus funds that an insurance company needs to have to fulfill the potential and continuing claim obligations.

Reasons Why the Rates May Not Get the Approval

The rates will not get approval from the Commissioner if they are found to be unfairly discriminatory, not sufficient to cover the costs and losses of the insurance company or poses the threat if establishing a monopolistic situation in the market. According to the law, the Commissioner does not have the power to disapprove rates that may be termed excessive only.

Modification of the Premium 

The first part of the rating formula is the classification code along with its corresponding rate. The rate is shown in terms of dollars and cents which is multiplied by each $100 of payroll for each classification. At first, estimation is done in order to identify the payroll for each of the classes and then multiplied (per each $100 of payroll) by the rates that are applicable. The sum derived from the equation is called the “base premium” and that premium goes through continuous modification where the rating plans (generally the judgment or schedule rating) is used and through the experience modification.

Calculating the Experience Modification

It is a requirement for an insurance provider to submit loss information to the WCIRB at a yearly basis from which the experience modification is calculated. WCIRB implies a mathematical formula (approved by CDI) to measure the experience modification for an employer.

For the calculation, the formula takes the following factors under consideration:

  • Claim loss reserves
  • Payroll amount for a certain experience period (which is generally the past three full years of workers compensation coverage)  and,
  • Reported paid loss

Experience modification helps to develop an overall picture of the average loss that the employers incur in the similar industry and is used as a tool to compare between different employers. The final rate is multiplied per $100 of payroll and premium (estimated) is developed when the experience modification along with any other modifications (like judgment or schedule) are applied to the class rate.

Prospective Rating

The formula that we discussed above is a type of basic Workers Compensation rating formula which is termed as “Prospective Rating”. Although various types of rating plans including dividend plans or retrospective rating can be used to measure the Workers Compensation premiums, it is the prospective rating that is used more often these days to serve the purpose. Firms looking to get detail information about the different types of rating methods are advised to contact with licensed broker-agents who can help them out with it. 

Premium Audit

It is simply not possible to calculate the final premium of the Workers Compensation policy for a firm until the policy term is over and the payroll records of the employers are audited. Whether the initial payroll estimate was high or low is determined by the final audits of the payroll records. The employer will owe additional premium in case the payroll exceeds the estimate. On the other hand, the insurance provider will have to provide the employer a return premium if the opposite thing happens, means if the payroll goes down the estimate.

Payroll Reporting Option

Some insurance companies come up with a payroll reporting option for a monthly basis in case of the Workers Compensation insurance because of the possible fluctuations in the payrolls which is not an uncommon thing. Now an employer may not be qualified for this option which may happen due to the payroll size. In such cases it is advised to the employer to work more closely with his/her company underwriter or broker-agent so that any significant payroll fluctuation can be reported during the policy term. The probability of a large premium audit bill or a large return premium can be reduced through corrected payroll estimates, something that can have significant impact on the cash flow of a company.

Rights of a Workers Compensation Insure: Things an Employer Needs to Know

An insurance company holds certain rights over an employer as far as dealing with Workers Compensation Insurance is taken under consideration and it is important for all employers to have clear understanding of those rights. Here we are going to have a brief discussion regarding the rights that a Workers Compensation insurer holds over an employer.

An employer needs to know that his/her Workers Compensation Company holds the right to go for auditing payroll records at anytime they feel it necessary. Although usually it is the final audit for which this right is reserved, but the insurer does hold the right to run an interim audit too. Non-renewal or cancellation of a policy may occur due to the failure to comply with an audit of the insurance company. In addition to the non-renewal or cancellation, an insurance company holds the right to apply all available legal means to collect the outstanding premium in such cases.

An employer needs to keep this in mind that intentionally underreporting a payroll is seen as insurance fraud, a crime that can be prosecuted to the fullest extent of the law. In order to collect necessary information on experience modification and the appropriate classification of categories for an employer, the WCIRB holds the right to conduct an audit of the payroll records. 

Issues regarding the Workers Compensation Claim and the Role of CDI

In most cases, the disputes regarding the insurance claims involving an injured employee and the insurer does not fall under the jurisdiction of the California Department of Insurance or CDI. However, it is to be mentioned that according to the California Insurance Code Section 1 871 4, CDI does hold the authority to conduct investigation of the falsified submissions or denial of Workers Compensation claims in particular instances.

It is the responsibility of the California Department of Industrial Relations, Division of Workers compensation to help the employers and workers when it comes to Workers Compensation claims. Any employer or employee who is in need of information regarding the Workers Compensation claim are advised to contact the Division of Workers Compensation’s Information and Assistance Unit.

The Information and Assistance Unit takes the necessary initiatives to resolve a dispute regarding Workers Compensation claim upon contact. A formal application for adjudication (dispute resolution) can be filed with the Workers Compensation Appeals Board if the Information and Assistance Unit fails to settle things down. Any involved party who is in need of filing the application may take help from the Information and Assistance Unit in case an attorney has not been retained. It is to be mentioned the exclusive jurisdiction over dispute resolution is held by that the Workers Compensation Board.

An employer should contact with his/her broker-agent regarding the general issues involving Workers Compensation claims. In addition to this, if the employer needs any help regarding a specific dispute then in such cases s/he may discuss it with a “claim adjuster” who is assigned by the Workers Compensation insurance company to deal the claim.

Workers Compensation Issues that are dealt by the California Department of Insurance (CDI)

When it comes to Workers Compensation insurance, California Department of Insurance (CDI) mainly handles the rating and underwriting issues. CDI has to deal with consumers who get in touch with it for assistance regarding various types of Workers Compensation related rating and underwriting concerns.

Now here we are listing down the common consumers issues regarding the Workers Compensation insurance that fall under the jurisdiction of CDI:

–          Audit related disputes

–          Handling of broker-agent

–          Notice regarding cancellation and nonrenewal

–          Disputes regarding the classification and experience modification

–          Dividend plans

–          Failing to submit the loss history reports

–          Insurance fraud

–          Insurer compliance involving the filed rates

–          Errors in rating

You will find all the necessary information about the procedure for appealing regarding the experience modification and classification disputes from the California Code of regulations (CCR) 2509.40-2509.78. If you are in need of assistance to deal with any sort of difficulties regarding underwriting and rating (related to the Workers Compensation) then you can contact with CDI. However, in some cases CDI may not be able to offer the necessary assistance if it does not have the jurisdiction. In that case you can go for an appropriate state agency which is capable of providing you the assistance.

In addition to this, people are advised to inform CDI regarding possible Workers Compensation fraud if they suspect anything. It is to be mentioned that a fraud report can be filed with CDI anonymously. The chances of arresting and prosecuting an offender involved in Workers Compensation fraud can be enhanced if reliable and complete information is provided regarding the issue.

 

Some Common Queries Regarding Workers Compensation

Question: 1 

What does loss reserve means? 

Answer: Loss reserve refers to an estimated amount of fund that an insurer puts aside in order to make payments for a claim. Loss reserves are used by the insurance companies for evaluating the value of each and every claim in terms of money.

Typically it is the responsibility of a claim adjuster to determine the loss reserve. The claim adjuster utilizes his/her judgment and experience from past claims (involving similar type of issues) to set the loss reserve.

Sufficient loss reserve is very important for an insurance company considering the fact that it allows the company to have a clear understanding about how much surplus it requires in order to comply with the present, emerging and future claim obligations. It is mandatory for an Insurance company to submit both claim reporting information and information regarding loss reserve to the Workers Compensation Insurance Rating Bureau (WCIRB) as this information is required to determine the experienced modifications.

An insurance company may find itself at financial risk due to poor loss reserve practices and inappropriate claim reporting. It is important to make sure that the loss reserves are kept precise as much as possible and updated at a regular basis based on the latest available claim information since it is very much important to sustain insurer solvency. While solvency can be affected by under-reserving, over-reserving can cause problems too. The premium of an insured can increase unfairly due to the inflated experience modification which can happen due to the practice of over-reserving claims.

Question: 2 

What is the procedure for an employer to request a Workers Compensation premium and loss history report?

Answer: A policyholder or his/her authorized broker is required to submit a request in writing for Workers Compensation premium and loss history report (also known as loss runs). Under the following circumstances (according to the CIC Section 11663.5), the insurance company needs to comply with the request within 10 business days:

  1. When the policy is cancelled or non-renewed
  2. If the information is requested by the policyholder within 60 days before the renewal date of an existing policy
  3. If a nationally renowned insurance rating service downrates the current rating of the policyholder to a financial rating below secure or good or to a rating which can have harmful impact over the capability of the policyholder to contact its business operations
  4. If the present insurer of the policyholder is conserved by the department…or received the order to cease writing business…

(The accurate statement of CIC Section 11663.5 regarding this can be obtained from other sources)

You can contact with CDI for assistance in case an insurance company is not complying with request (in the written format) for loss runs under the provisions of 11663.5. 

Question: 3 

What does “minimum premium” refers to? 

Answer: Minimum premium is a fund kept by an insurance company to cover the costs that are involved in issuing and servicing policies. The premium generated from the premium calculation can be considerably low for a company with a small payroll. In cases where the calculated premium remains too low for the insurer to even meet the basic costs, it is not going to be wise to offer insurance for the risk considering the fact that the insurer will start losing money before any claim occurs.

The insurance companies calculate the smallest tolerable premium that they are willing to charge for accepting risks by setting up a minimum premium. As a component of their rating plan with CDI, it is mandatory for each and every insurance company to file their minimum premium requirements.

 

Question: 4 

Suppose an employer has cancelled a policy during the policy year, what will happen then? 

Answer: An insurance company will have to return any premium owed on a short rate basis if an employer cancels his/her Workers Compensation policy in the middle of the policy year to obtain insurance with some other company or to close down a business.

The short rate is assessed to the policyholder in such cases as an administrative penalty for failing to complete the contracted term of insurance. If the short rate cancellation amount is lower than the minimum premium, in that case the insurance company may consider charging a minimum premium for the cancelled policy to cover the costs. If any difficulty arises due to a cancellation or premium refund issue, an employer can contact with CDI regarding this for assistance. 

Question: 5 

How do the outstanding claims affect the insolvency of a company? 

Answer: Both the employers and the employees receives necessary protection in times when a Workers Compensation insurance company gets insolvent. The conservation and liquidation of an insurance company is administered by the Insurance Commissioner under appointment of the courts.

Conservation as well as the liquidation is dealt by the Conservation and Liquidation Office (CLO) of CDI. The California Insurance Guarantee Association (CIGA) and CLO work very closely to make sure that the payments of the claims are done within a reasonable period of time without unnecessary delay considering the fact that the payments of the claims for Workers Compensation can be very crucial. This eases the burden from both the employers and employees in times when the insurance company faces insolvency.

CIGA operates as a safety net which guarantees that the payments of the claims will be made regardless of whether the liquidated assets of the insurance company are sufficient to cover the claims. Those who are interested to get more information or needs any assistance regarding conservations and liquidation are advised to contact with CDI or/and CIGA.

Question: 6 

What does the dividend plan refer to? 

Answer: The dividend plan is a kind of rating plan which gives the employers the opportunity to share in the profits of their Workers Compensation carrier which comes in the form of a dividend. In such cases the dividend plans are often referred as participating policies of insurance considering the fact that the employer gets a share from the profit of the insurer.

You will find different types of dividend plans that comes with different sort of requirements as well as provisions. An employer can contact with his/her broker agent to get detail information regarding other options to prospective rating if s/he is interested about pursuing such options.

You can take a look at the information in the “Prospective rating” paragraph under the section “Calculating the Workers Compensation Premium” for relevant information. It is to be mentioned that it is mandatory to submit all the dividend plans along with all other information regarding the rating plan to CDI to get the approval.

Question: 7 

Is this possible for an insurance company or broker-agent to guarantee the amount of an upcoming Workers Compensation dividend? 

Answer: It is clearly stated in the California Code of Regulations (CCR) that neither the insurance company nor the brokers-agents can guarantee or any way pledge the payment amount of future Workers Compensation dividends. You can check out the Title 10, Chapter 5, Subchapter 3, Article 9, Section 2505 for information regarding this issue. It is to be mentioned that the policyholder dividend statement can’t imply (directly or indirectly) the amount of future dividend payments although a company representative or broker-agent may offer past dividend payment amounts as a part of illustration.

It is important for an employer to keep in mind that if s/he encounters with a company representative or broker-agent who is misrepresenting their dividend plan (particularly through promising the future dividend results directly or indirectly) then s/he should inform CDI about this as soon as possible. 

Question: 8 

Suppose a dispute on a Workers Compensation classification code has taken place, what can be done by the employer now?  

Answer: A broker-agent or company underwriter should be contacted in order to hold a discussion and/or for an explanation regarding a particular classification code if an employer raises questions regarding the assignment of the code. It is mandatory for the company to inform the employer or the broker-agent regarding any change of the classification code if the underwriter makes such changes which leads to an increased premium (unless the reclassification takes place under the authority of the Insurance Commissionaire or due to a regulation of CDI). The employer do have the right to file a written complain with CDI if a dispute arises regarding an existing or reclassified code.

In addition to this, an employer can file a written dispute with WCIRB if s/he wants to dispute a classification decision which was made by the WCIRB. A written complain can be filed with CDI in such cases if the request gets rejected or not acted upon within a 30 day period. You can check the section “Issues regarding the Workers Compensation Claim and the Role of CDI” for more information about the appeals process for classification and experience modification issues.

Glossary

Agent: Agent is a licensed individual or organization that is authorized to sell as well as service insurance policies for an insurance company.

Agreed Medical Examiner (AME): Agreed Medical Examiner is a physician who is responsible for assessing any disputed medical-legal issues. This physician is maybe selected jointly by the parties in cases where an attorney represents the injured employee.

Binder: Binder refers to the short term agreement that provides a temporary insurance coverage until the policy can be delivered or issued.

Broker: A person or an organization which is responsible for selling and servicing the insurance policies on behalf of you is termed as broker.

Broker-agent: Broker-agent is an individual who has the license to operate as an agent to represent one or multiple insurers. S/he also works as a broker who deals with one or more insurers on behalf of you, representing you interests.

Cancellation: Termination of an in-force insurance contract before it reaches the normal expiration date is termed as “cancellation”.

Claim: Claim refers to the notice that an insurance company receives regarding a loss that has taken place which may fulfill the requirements to get covered according to the terms and conditions of the policy.

Claim Adjuster: Claim adjuster is an individual who assess the damage caused by a covered loss and calculates the amount that is required to be paid under the terms of the policy.

Commercial Lines: Commercial lines represent the insurance coverages provided for the business organizations, commercial institutions and professional organizations (as contrasted with the personal insurance).

Commission: The part of a policy premium that an agent receives from the insurance company as the compensation for his/her service is called commission.

Conditions: Conditions refer to the part of an insurance contract that describes the rights as well as duties of both the insured and insurer.

Consequential Bodily Injury: Under some special situations, a work related wound can lead towards another injury that is not related to work in case of Workers Compensation- in such conditions, this term is used. (you may check out some other terms like: Loss of Consortium, Dual Capacity and Third Party for more relevant information).

Coverage: The protection that is offered under the insurance policy is termed as “coverage”.

Declarations (DEC) Page: Declarations page is normally the first page of an insurance policy that includes the complete legal name of the insurance company, the policy number, the payable premium, effective as well as expiration dates, the amount and types of coverage and deductibles.

Deductible: Deductible refers to the amount of loss that is required to be paid by an insured before the benefits under the insurance policy becomes payable.

Dual capacity: as far as Workers Compensation is taken under consideration, an employer can be accountable to a worker/employee in two ways if the employee gets physically injured while s/he is on duty by using a product or service produced by the employer. In that case first of all, the employee is eligible to receive the benefits of the Workers Compensation and secondly, s/he may sue the employer for his/her defective product or service which led to that injury.

Earned Premium: A certain part of the policy premium that is paid by the insured which has been allocated to the loss experience, expenses and profit year to date of the insurance company is called “earned premium”.

Endorsement: Endorsement is a written agreement that modifies an insurance policy through including or deducting coverage.

Effective Date: Effective date is the date when an insurance policy starts or becomes effective.

Exclusion: Exclusion is a contractual provision under an insurance policy which restricts the coverage for certain individuals, locations, perils (risks) or property.

Experience Modification: Alteration of the premium from the use of experience refers to “Experience Modification”. The past loss experience of the insured (where generally the last three years are taken under consideration) is reflected through the experience rating plans which apply the experience in order to modify and determine the premium for the current policy year.

Expiration Date: Expiration Date is the date mentioned in an insurance policy when the coverage gets terminated.

First Party: First party is the insured or policyholder in an insurance contract.

Flat Cancellation: Flat cancellation is the cancellation which occurs on the policy effective date. In such cases, other charges (like the service charge) may apply although no premium charge will be applicable.

Fraud: A deceptive act done by an individual(s) deliberately in order to gain illegal or unfair advantage (which usually involves monetary gains) is termed as “fraud”.

Frequency: Frequency refers to the number of times a loss takes place.

Hazard: An event that enhances the likelihood or potential severity of a loss is termed as “hazard”.

Indemnity: Usually the term “indemnity” refers to the compensation for a loss. As far as a property and casualty contract is taken under consideration, the goal is to secure the same sort of financial condition for the insured after the occurrence of a loss that s/he enjoyed before the loss took place.

Independent Adjuster: Independent adjuster can be an individual or an organization that operates on the basis of contracts offering claim adjustment services to different insurers.

Insurance: The method or process through which an individual, business or organization can shift their risk(s) to an insurance company for which that individual, business or organization needs to pay a certain premium to the company. Under this system, the insurance company pledges its commitment to be responsible to cover the losses.

Insured: The policyholder(s) who are eligible to receive the coverage from an insurance company under the insurance policy is known as the insured.

Insurer: A company that offers insurance and agrees to cover losses and offers covered benefits is known as an insurer.

Judgment Rating: Judgment rating refers to the modification of the rating (either by decreasing or increasing) which is done on the basis of the experience, best judgment and analysis of an underwriter in classifying as well as underwriting a particular kind of risk.

Lapse: Lapse refers to the cancellation or termination of a policy in case of property and casualty insurance because of the failure to pay the premium within the due time.

Liability Insurance: Liability insurance provides the necessary coverage for the legal liability of a policyholder which occurs due to the injuries of other people or damages to their property.

License: A certificate that CDI issues to an agent, broker, broker-agent or insurer in order to give them the legitimacy to conduct insurance business is known as “license”.

Limits of Insurance: Limits of insurance refers to the highest amount of benefits that an insurance company agrees to pay for a loss or damage.

Loss of Consortium: Loss of Consortium refers to that situation where in case of a bodily injury claim (which includes the Workers Compensation claims too) a spouse argues that the physical injury suffered by his/her partner deprives them from natural affection or spousal duty, assistance as well as the companionship of the said spouse.

Managerial General Agent (MGA): Managerial General Agent is an individual who gets appointed by an insurance company with the authorization to manage all or partial business activities of the insurer. The responsibilities of a Managerial General Agent may include: appointing and supervising other agents, dealing with the marketing, policy insurance, premium collecting as well as underwriting, dealing with reinsurance related negotiation, payments for claims and so on.

Material Misrepresentation: Material Misrepresentation refers to the factual falsification which has been conducted in such a way that if the truth was revealed to the insurance company during the time of the issuance of a policy, the company would refuse to insure the risk. An insurance company can cancel a contract if it finds any material misrepresentation in case of a policy.

Misquote: Misquote refers to the estimate of an insurance premium which is not correct.

Nonpayment of Premium: If a policyholder fails to make payment for the premium on a policy or pay the installment premium payment that is due on a policy, then it will be called as nonpayment of premium.

Nonrenewal: Nonrenewal refers to the termination of an insurance policy on its usual expiration date.

Occupational Accident: If an employee or worker suffers a work-related accident and gets injured because of this, then that accident will be termed as occupational accident.

Occupational Disease: Occupational disease refers to the illness suffered by an employee or worker due to job-related exposures or conditions.

Occupational Hazard: A certain condition of an occupation and the surrounding work environment which enhances the peril of illness, accident or death is called occupational hazard.

Occurrence: The liability insurance policy which covers the claims that arises out of occurrences that takes place during the policy period (regardless of the time when the claim was filed) is known as occurrence.

Permanent Disability Rating Schedule: Permanent Disability Rating Schedule is a schedule that is used to find out an injured worker’s percentage of permanent disability and modify it.

Personal Line: As contrasted with the commercial lines, the personal line is the insurance that is written on an individual’s (or on more than one individual’s) private and real property in order to include such policies as personal auto insurance and homeowners insurance.

Policy: Policy is the contract that includes the rights as well as the duties of both the insurance company and the insured.

Premium: Premium is a type of monetary payment that is made by an insured to the insurance company in return of a contract that indemnifies the insured against potential loss or damage. The insured makes this payment in order to keep the insurance policy in effect.

Producer: Individuals like agents, brokers, broker-agents and solicitors are referred as producer in the insurance industry.

Pro Rata Cancellation: If an insurance company returns the unearned premium to the policyholder after the policy being cancelled, then it will be termed as Pro Rata Cancellation. The returned premium is that part of the premium for rest of the time period that the policy will not be in effect.

Provisions: Provisions refers to the statement of policy conditions included in the insurance policy.

Qualified Medical Evaluator (QME): A Qualified Medical Evaluator or in short QME is appointed and regulated by the DWC Medical Unit. A QME is responsible for assessing the permanent impairment and limitations of an injured employee and conducts evaluation of a wide range of issues involving medical disputes. In many cases you will find the QME in action for conducting a separate medical evaluation where the opinion of the treating physician is disputed.

Quotation: Quotation is the estimated cost of insurance which is calculated based on the information that is supplied to the agent, broker, broker-agent or the insurance company.

Recision (or Recession): Recision is the termination of an insurance policy back to the date when it came in effect. In such cases, all premium that was charged has to be retuned.

Regulations: The CDI established requirements CDI which implements the laws that the legislature has passed falls under the term “regulations”. It is to be mentioned that the regulations needs to go through a public comment process and also needs to get the approval from the state Office of Administrative Law.

Reinstatement: The restoration of a canceled or lapsed policy is known as reinstatement.

Renewal: If a policyholder continues to go on with an exiting insurance policy (offer of renewal) into a new term with the same insurance company that offered that policy, then it will be referred as renewal.

Scheduled Rating: Schedule rating is the process through which the price for property and liability insurance is determined. Under this system, debits and credits are used in order to modify a base rate which is determined by special characteristics of the risk exposure. Considering the fact that actuarial experience shows a direct connection between specific physical characteristics and possibility of loss, the insurers develop the Schedule Rating. In most cases, the schedule rating plans are required to be filed with CDI in order to get the approval.

Second Party: The insurance company involved in the contract is known as the second party.

Self-Insured Retention (SIR): Self-Insured Retention refers to that portion of a liability or property loss that a policyholder retains.

Severity: The size of the loss is called severity. Loss severity is taken under consideration when it comes to determining the rates of the premiums.

Short rate Cancellation: In cases where the cancellation of a policy gets initiated by policyholder request, the premium that is returned becomes a subject for administrative penalty which is applied on the policyholder.

Subrogation: Subrogation is the process through which the amount of losses that are paid to a policyholder (by the party that is legally accountable for making the payment) is recovered. When the legally liable third party is persuaded by a company, in the recovery process it has to take the deductible of the policyholder into account.

Third Party: Third Party is an individual other than the policyholder and the insurance company who got negatively affected (suffered a damage or loss) and maybe eligible to obtain compensation according to the policy based on the acts of negligence or omissions of the policyholder.

Third Party Over: Third Party Over refers to the doctrine which allows an injured worker/employee to bring suit against a third party for some reason where the third party can bring an action against the employer.

Underwrite: Underwrite is the procedure through which an insurance application along with the independent sources are evaluated in an attempt to verify the provided information and also to assess the acceptability of the risk.

Underwriter: The person who is responsible for dealing with the process of underwriting in order to accept, reject or modify the risks on behalf of the insurer is known as the underwriter.

Unearned Premium: Unearned premium is that part of the written premium which is applicable to the unused or unexpired portion of the policy period for which the premium was paid. Say for example, in case of an annual policy, at the end of the policy’s first month, as much as 11/12 of the premium is unearned.

Waiver: Waiver is the relinquishment of a right which is known, something which may be implied or expressed.

Written Premium: The total premium that an insurer writes for a certain period of time for all policies-without considering which part of it has been earned- is called written premium.

U.S. SECRETARY OF LABOR EUGENE SCALIA HIGHLIGHTS MINE SAFETY AND ECONOMIC RECOVERY IN WEST VIRGINIA

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WASHINGTON, DC – Today, U.S. Secretary of Labor Eugene Scalia traveled to Grafton and Bridgeport, West Virginia, to discuss mine safety, economic recovery and the importance of the coal mining industry to the American economy.

During his stop in Grafton, Secretary Scalia toured the Leer Mine Complex operated by Arch Resources Inc. Secretary Scalia joined miners hundreds of feet below the surface, where they showcased the mine’s day-to-day operations. He also visited with company leadership and employees to discuss safety and health during the coronavirus pandemic and economic recovery.

Secretary Scalia then traveled to Bridgeport, where he visited a local Mine Safety and Health Administration (MSHA) office and met with employees to discuss MSHA’s work.

“The mining industry plays a central role in our economic growth and the success of American manufacturing, which is why the Department is determined to ensure that miners can go about their work safely,” said U.S. Secretary of Labor Eugene Scalia. “As we recover from the pandemic, the mining industry will continue to be an important source of jobs and resources. I thank David Zatezalo, assistant secretary of labor for mine safety and health, for joining me and carrying out MSHA’s mission to protect America’s miners.”

The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

Agency: Office of the Secretary
Date: September 9, 2020
Release Number: 20-1731-NAT
Contact: Eric Holland
Phone Number: 202-693-4676
Email: holland.eric.w@dol.gov

                                                                                                                                            
Source: United States Department of Labor.

https://www.dol.gov/newsroom/releases/osec/osec20200909

United States Department of Labor issued the above News Release on September 9, 2020.

Ladera Ranch self-storage management company fined $250,000 for unlicensed activity

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News: 2020 Press Release

For Release: September 4, 2020
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov
Ladera Ranch self-storage management company fined $250,000

ORANGE, Calif. – The California Department of Insurance fined self-storage company, SmartStop Asset Management, LLC, $250,000 in monetary penalties for offering and selling more than $2.1 million in insurance products to its renters without an insurance license.

“Companies that are not properly licensed to transact insurance in California place policyholders at risk because the insurers have not met the standards required under state law,” said Insurance Commissioner Ricardo Lara. “In this case, my Department’s investigation ended this illegal activity to protect California renters throughout the state.”

SmartStop Asset Management, LLC and its affiliates, collectively “SmartStop”, control, manage, or contract with other entities to manage self-storage facilities that are leased to California renters.

On July 27, 2020, the Department issued a Cease and Desist order to SmartStop, requiring the unlicensed company to immediately stop selling insurance products to their California storage unit renters. The Cease and Desist Order alleges between October 2017 and July 2019, SmartStop offered and sold approximately 19,500 insurance policies to California consumers without an insurance license from the Department as required by law.

The Department’s investigation discovered SmartStop charged renters more than $2.1 million for renters’ insurance, retaining more than $1.8 million as operating fees. It was not disclosed to renters that they would be paying high fees to SmartStop for insurance that actually cost far less.

# # #


The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

                                                                                                                                            

Source: California Department of Insurance.

http://www.insurance.ca.gov/0400-news/0100-press-releases/2020/release085-2020.cfm

California Department of Insurance issued the above Press Release on September 4, 2020.

Available Insurance Policies Explained

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What is General Liability Insurance?

A type of insurance coverage that provides protection to the insured in case he/she is sued for claims that arise within the coverage of the policy. This type of insurance policy is common for businesses and companies, as it provides protection when negligent acts resulted in bodily injury or property damage on the business premises, or when someone is injured as a result of using the distributed or manufactured product of the company.

 What is Property Insurance?

It provides protection to any types of property against the risk that most likely arise, including fire, theft, vandalism, etc. This kind of insurance coverage has various specialized forms such as home insurance, flood insurance, fire insurance, boiler insurance or earthquake insurance. The property is also insure in two main ways — the named perils and open perils.

  • Named perils – this type of policy that provides insurance coverage for damage-causing events that are only specified in the policy documents.
  • Open perils – this type of policy covers all forms of losses and damages caused to the insured property.

What is Business owner’s policy (BOP)?

BOP is an insurance policy that combines protection against major property and liability risks in one package. It is commonly comprised of property insurance, liability insurance, auto insurance, crime insurance and business interruption insurance. Business owner and the insurance company can make arrangement on what to include in the insurance policies, depending on the company’s needs.

What is Commercial Auto Insurance:

An insurance premium purchased to protect a company’s vehicles such as cars, motorcycles, trucks and other road vehicles. Its primary use is to provide protection against physical damages and bodily injury resulting from accident specially traffic collision, as well as against liability that could arise after.

What is Worker’s Compensation Insurance?

Worker’s compensation is a type of insurance that provides medical benefits and wage replacement to employees who suffered from injuries or accident during the course of his/her job. This type of benefits is claimed by employees as a matter of rights and the employer cannot resort to any legal actions made by affected employee. Thus, the benefit is given to the employees in exchange for waiving their legal rights to sue their employers for the incident.

What is Professional Liability Insurance?

Also known as Errors and Omissions Insurance, Professional Liability Insurance is a type of insurance policy that gives protection to professionals such as lawyers, accountant, property agents, etc. against negligence or other claims imposed by their customers. Each professional who have expertise in a specified field are required to obtain this type of insurance coverage because general liability insurance policies do not offer insurance coverage against claims arising out of professional or business practices like misrepresentation, negligence or malpractice.

What is Directors and Officers Insurance?

Directors and Officers Insurance is risk-reduction insurance coverage for directors and other senior officials of an organization. This type of insurance policy protects senior executives of the company against their direct actions that could affect the financial status and operation of the company. Insurance claims under this policy includes reimburses, either in partial or in full, the costs resulting from lawsuits faced by senior executives arising out of their poor management decision, shareholder grievances, employee dismissals and among others.

What is Data Breach Insurance

A data breach is a security incident wherein sensitive, confidential and protected data stored in a computer system has been hacked, stolen, used or viewed by unauthorized person. Data breaches may involve personally identifiable information (PII), personal health information (PHI), intellectual property or company’s confidential information.

To protect the company against such risk, data breach policy is offered and covers variety of losses including the cost of restoring or recovering lost data; responding to a data breach like payment of credit monitoring and cost of notifying customers; lawsuits filed by those customers whose data was disclosed; interruption of business operations caused by data breach; and defending regulatory measures like regulatory fines.

What is Homeowner’s Insurance?

Homeowner’s insurance is the most common type of insurance policy and offers broad protection packages that typically covers the policyholders, his/her spouse and children living in the same household. Its primary coverage includes protection against damages to the home as well as the items inside the home caused by fire, personal liability exposure and other similar perils. Although common homeowner’s insurance does not cover some events such as floods, earthquakes or other ‘act of God’, policy holder can acquire additional supplementary policies that cover such eventualities.

What is Renter’s Insurance?

Renter’s insurance is similar to homeowner’s insurance but the insurance coverage only applies to the tenant of the home. It provides insurance coverage for the policy holder’s belongings and liability against theft, fire, vandalism or other means of damage to the tenant’s personal property within the rented property. This kind of insurance coverage applies to any individual renting or subletting a single-family home, duplex, condo, apartment, townhouse or loft.

What is Life Insurance?

Life insurance is intended to protect a family against the financial hardship that accompany the premature death of the policy holder. This kind of insurance has two options:

  • Term Insurance – provides insurance coverage at a fixed rate of payment and limited period of time. This means that if the period expires, the coverage of the premiums you have paid is no longer valid. This option is a pure death benefit and its primary purpose is to provide financial benefits and assistance upon the death of the policy holder.

Permanent Insurance – provides insurance coverage to the policy holder as long as he/she pays for the premium. It can never be cancelled and it is designed to pay out a benefit in all cases, thus this type of premium is much expensive compared to term insurance.

Commissioner Lara urges insurance companies to cover reimbursement costs for those displaced during wildfires

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News: 2020 Press Release

For Release: September 3, 2020
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov
Commissioner Lara urges insurance companies to cover reimbursement costs for those displaced during wildfires

LOS ANGELES, Calif. — To assist Californians displaced by the current and recent wildfires throughout the state, Insurance Commissioner Ricardo Lara issued a Notice to all California property and casualty insurance companies urging them to cover Additional Living Expenses (ALE) for those policyholders who remain under mandatory evacuation or whose homes are otherwise inaccessible or uninhabitable due to the wildfires.

“When people are told to get out of harm’s way by first responders, they should be able to access insurance benefits, not be forced to pay out of pocket for necessary emergency costs when they are still under evacuation orders or without water or power,” said Commissioner Lara. “While I have sponsored legislation to address this issue, people need help now to recover from these devastating fires.”

All homeowners’ insurance policies provide benefits for loss of use or ALE to cover the extra costs associated with temporary lodging, transportation, clothing, and other necessities caused by a covered peril, such as a wildfire, that renders the home uninhabitable or inaccessible. Homeowners’ insurance policies also cover ALE if access to the home is restricted in cases where a civil authority has issued mandatory evacuation orders from the recent and ongoing wildfires impacting most of the state.

“When you’ve lost the use of your home due to a disaster, you have a reasonable expectation that the insurance you’ve been paying for will cover your temporary living expenses,” said Amy Bach, Executive Director of United Policyholders. “That’s one of the primary benefits of home insurance. We commend Commissioner Lara for reminding insurers of this very basic, important obligation.”

The Department of Insurance has received numerous complaints from policyholders who are hearing from insurance companies that their ALE benefits are being terminated after the initial two weeks unless the insurance company can verify, or the policyholder can prove, that the policyholder’s property suffered damage due to the fires and is still currently uninhabitable, even though mandatory evacuation orders are still in effect in some areas. The Department has also received several related consumer complaints of ALE benefits being discontinued when their homes are uninhabitable due to lost power or water service as a result of the wildfires.

Commissioner Lara sponsored Senate Bill 872, authored by Senator Bill Dodd, this legislative year to address these and other insurance claims issues following a wildfire emergency. The bill has passed the State Legislature with strong bipartisan support and is now heading to the Governor for his consideration. SB 872 would allow for an extension of the two-week limit that is currently in place, and allow for coverage when a home is not damaged but is otherwise uninhabitable for another reason, such as having no electricity or water service caused by a covered peril. The bill would also require an advance payment of no less than four months for costs for living expenses and mandate an advance payment of no less than 25 percent of a policy limit for lost contents without submission of an inventory form, among other consumer protections.

# # #

Media note:

  • Notice on Continuation of Additional Living Expense (ALE) Benefits


The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

                                                                                                                                            

Source: California Department of Insurance.

http://www.insurance.ca.gov/0400-news/0100-press-releases/2020/release084-2020.cfm

California Department of Insurance issued the above Press Release on September 3, 2020.

U.S. DEPARTMENT OF LABOR RELEASES WORK-RELATED INJURY AND ILLNESS DATA

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WASHINGTON, DC – The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) has released work-related injury and illness data electronically submitted by employers. The agency has posted Form 300A data for calendar years 2016, 2017 and 2018, as well as a data dictionary.

The release follows two rulings in Freedom of Information Act (FOIA) cases. See Center for Investigative Reporting v. Department of Labor, No. 4:18-cv-02414-DMR, 2020 WL 2995209 (N.D. Cal. June 4, 2020); Public Citizen Foundation v. United States Department of Labor, No. 1:18-cv-00117 (D.D.C. June 23, 2020).

Electronic submissions are required of establishments with 250 or more employees that are currently required to keep OSHA injury and illness records, and establishments with 20-249 employees that are classified in specific industries with historically high rates of occupational injuries and illnesses.

The fact that an employer provided data does not mean that the employer is at fault, that the employer has violated any OSHA requirements, that OSHA has found any violations, or that the employee is eligible for workers’ compensation or other benefits.

For more information, and a link to the Injury Tracking Application, visit the Injury Tracking Application Electronic Submission of Injury and Illness Records to OSHA.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA’s role is to help ensure these conditions for America’s working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit www.osha.gov.

The mission of the Department of Labor is to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

Agency:

 

Occupational Safety & Health Administration
Date:

 

September 4, 2020
Release Number:

 

20-1659-NAT
Contact: Megan Sweeney
Phone Number:

 

202-693-4661
Email:

 sweeney.megan.p@dol.gov

                                                                                                                                            
Source: United States Department of Labor.

https://www.dol.gov/newsroom/releases/osha/osha20200904

United States Department of Labor issued the above News Release on September 4, 2020.

Garage Insurance

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Garage Insurance

Garage insurance is a special policy aimed at covering businesses in the automotive industry. It is a crucial requirement for automobile dealers, service stations, repair and customization shop owners, and parking lots operators. It makes up for the coverage for damages to third-party vehicles, which is usually not covered in the standard commercial general liability policy.

What Does Garage Insurance Cover?

This specialized policy specifically covers your business against claims from third-party injuries and property damages resulting from accidents during garage business activities. You can choose to set your plan at basic coverage or enhance it with additional policy for better and broader coverage.

Basic Garage Insurance Coverage

Basic coverage covers lawsuits if your business is sued for the cost of treatment for bodily injury sustained on your business premises. For instance, if a customer, vendors or bystander slips and falls at your shop. It may also cover general liabilities from business activities, such as discrimination lawsuits from an employee. It also includes dishonesty coverage, which covers you against theft or vandalism done by an employee to a customer’s vehicle.

Additional Garage Insurance Coverage

You may get additional coverage which covers damages to a customer’s caused by a product sold or manufactured by your shop.

Is Garage Insurance the Same as Garage Keepers Insurance?

Both are similar kinds of policies and crucial to the automotive industry, but with some differences in the area of coverage. While garage insurance covers policyholder’s business operations and autos, the other is for damage to a customer’s vehicle. Garage keepers insurance covers incidents that occur when working on a customer’s vehicles, including damages not caused by you or your employees, such as fire, theft, extreme weather, collision and vandalism.

Which Should I Choose?

You can get any or both policies from the same insurer, depending on your services. For every automotive business, garage insurance is a must. And if you keep customers’ vehicles in your shop, either for short-term or long-term repairs or services, you should also consider complementing your general garage insurance with garage keepers policy.

How to Get the Best Garage Insurance for Your Business

You can get quality coverage and save money on your policy if you deal with the right insurer. Try to compare quotes from different insurance companies or agents and buy from the one with the best offer.  The insurance amount will basically depend on your company’s annual revenue, number of employees, type of coverage and limits of coverage chosen.