Thursday, February 5, 2015

This Month's Employer Charged Criminally Over WC Premiums

I wrote last month about what I described as the first 2015 news story I had seen about an employer being charged criminally over Workers Comp premiums. Here's February's entry in that category: A Milltown, New Jersey couple and their nephew who ran a temp staffing firm.

Let me be clear about the fact that I know nothing about this case, beyond what is in the news story. So I have no way of knowing how much, if any, of the charges against these people might be warranted. But it does once again provide stark warning to business owners and managers everywhere to be careful about being too aggressive in seeking to exploit perceived loopholes in WC rules, or relying upon advice from some insurance 'professional' who advocates taking questionable measures to reduce premiums.

Of course, it can be difficult for policyholders to determine what constitutes 'questionable' measures and what might instead just be smart management.

I remember a time, going back perhaps ten years or more, when we started dealing with a new audit manager on behalf of some of our clients. This audit manager worked for a California-based WC insurer which had acquired a large Illinois insurer of Workers Comp (that's why we were suddenly in contact--back then, we were more concentrated on Illinois based clients).

This audit manager was markedly hostile to responding to us at all. Turns out he had experience dealing with a different audit review firm, and had become convinced that a) that other firm was trying to get refunds fraudulently and b) all such firms must be crooks, also.

It took a fair bit of work to convince this audit manager that we weren't crooks and that the overcharges we were bringing to his attention were legitimate, but we were eventually successful. But I thought about those companies that had used the services of that other review firm. It had sounded like that other outfit had gotten those policyholders involved in what amounted to premium fraud. Our skeptical audit manager eventually confided to me that he had been trying to get prosecutors interested in pursuing criminal charges against that other firm, but the company went out of business before those plans bore any fruit.

But that anecdote does illustrate that not all 'professional' advice should be heeded, and that not all efforts to reduce Workers Comp insurance premium charges are legit. When it comes to Workers Compensation insurance, some insurers are more than ready to sic a prosecutor on an employer/policyholder they think has been pulling a fast one.

Only problem with that, I think, is that sometimes insurers underestimate how confusing the rules about Workers Comp premiums can be, and may interpret innocent actions and errors as something nefarious. The devil, as they say, lurks in those details.

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