Certificates of Insurance: Worth The Paper They're Printed On?

Interesting news item from California, about an insurance agent arrested for misappropriating Workers Comp insurance premiums and issuing bogus Certificates of Insurance.  And it reminded me of what a poor vehicle Certificates of Insurance really are for providing reliable information about insurance coverage.

A Certificate of Insurance is often issued by an insurance agent/broker on behalf of a client, to provide required evidence to some third party of insurance coverage being in place. But as this news story illustrates, an unscrupulous agent/broker can issue deceptive or fraudulent Certs that mislead the parties relying upon them. Even in less egregious cases, Certificates can mislead.

For one thing, the standard Certificate form says that the insurer will "endeavor" to inform certificate holders if the policy gets cancelled prior to the expiration date. "Endeavor" means, in this instance, "we'll sort of try to notify you, unless it's inconvenient for us, or if we just screw up, in which case you're S.O.L."  So if the policy runs until December 31st, but the policy gets cancelled August 5th for non-payment, the party relying on the Cert may or may not be informed that the insurance coverage has vanished.

And sometimes, the third party recipients of Certificates are demanding coverage details that are difficult or impossible to actually obtain in the real world. So some insurance agents/brokers will indicate on the Certificate that the policy complies with the unrealistic coverage requirement, even though the policies does not in fact so comply. And the fine print of the Certificate makes clear that if the Cert contradicts the actual policy, it is the policy that determines coverage, not the Cert.

For those interested in further reading on the subject, here's a White Paper prepared on Certificate of Insurance issues.

Oklahoma WC Changes Are OK, Says Court

The Oklahoma Supreme Court has ruled that recently-enacted changes to that state's Workers Compensation statutes are constitutional. The law, Senate Bill 1062, allows employers to opt out of the state administrative system, and create their own equivalent benefit plans for injured workers.

The OK law, modeled after a similar effort in Arkansas, eliminates the adversarial system for adjudicating Workers Compensation claims, and replaces it with an administrative system.

It will be interesting to watch this experiment unfold, to see if it truly improves outcomes for injured workers, as claimed, while also reducing costs for employers. Too often, it seems, one side of that equation suffers when the other improves.

Former Arizona WC State Fund Has A New Name

The former Arizona State Compensation Fund has operated as an independent entity for years, but the entity known as SCF Arizona will now be known as CopperPoint Mutual Insurance Company. The company will still have an A- rating from A.M. Best.

This is part of a continuing trend, for state Workers Comp funds to be morphed into mutual insurance companies, and would appear to be a good thing, as having Workers Comp reserves available for raiding by state politicians is just waaay too big a temptation.

New Study Suggests "Zero-Cost" WC Claims Paid by Health Plans

A study published in the December issue of The Journal of Occupational and Environmental Medicine concludes that so-called "Zero Cost" Workers Comp claims end up being paid under employer health insurance plans.

The report suggests that this reflects an inadequacy in Workers Compensation coverage, which doesn't ring true with me. If this study really holds up to analysis--that is, if genuine work-related injuries and illnesses are being fobbed off on health insurers, it would suggest to me that the problem would lie not in Workers Compensation coverage, exactly, but in the hurdles some insurers might be placing in the way of injured workers.

But some commentators have suggested that the authors of the study may be misunderstanding how Workers Compensation insurance works. It may be, these critics suggest, that claims that initially are put forward as being work related just don't pass muster when examined more carefully by claims adjusters. After all, it is not unheard of for a worker to try and pass off as work-related an injury that actually happened on the worker's own time. So it would be entirely appropriate for such claims to be handled instead by health insurance programs rather than Workers Compensation insurance.

After all, just because a claim is initially submitted as Workers Compensation, it doesn't mean that the facts of the situation will ultimately support such a claim. Even with the best of intentions, there can be misunderstandings about what is and is not genuinely work related, under the specific statutes of a given state. An injury in a parking lot, for example, before a worker has actually entered the workplace, could generate an initial claim under Workers Comp, only to be ultimately rejected by the WC insurer or a state's WC judges.

So it is not entirely clear to me that the methodology used here is as airtight as it might be. I'll try to get a copy of the actual report (rather than just relying on press reports) and offer a more detailed analysis at a later date.