Homeowners and Workers Comp

The California Department of Insurance has issued a press release, warning homeowners to make sure to verify the license and insurance status of any contractors they hire to do work on their house. An uninsured contractor or sub-contractor, if injured, can make a claim against the homeowner under California Workers Comp law.

This kind of exposure varies from state to state--some states have addressed this issue by statute, seeking to exempt homeowners who hire people to work on their home-- but many, such as California, have not.

This sort of thing happened to my own grandmother, many years ago. She hired a roofer who, it turns out, did not have insurance. The poor man fell off the roof to his death, and she was held liable under Illinois Workers Comp laws (which have since been amended to make this sort of thing less likely.

Of course, even in states that have tried to address the issue, the law may not be settled and clear-cut. And I would hasten to add that I am not an attorney. This article is not intended to offer any advice or opinion about the legal question of who is and is not eligible for Workers Compensation benefits. Those rules vary state by state, and evolve over time as well, as the law is changed or as court decisions are rendered.

So a word to the wise--check your state's laws on this point before hiring anyone to do work at your home, and then carefully verify their license and insurance status.

Sauce For The Goose?

I know I've written about this subject before, but recent events have freshened my frustration and sense of injustice. Every day, my Google News service brings me fresh stories about employers and workers being charged or convicted of Workers Compensation fraud. Now, I don't necessarily have a problem with that--those who defraud the Workers Comp system harm honest businesses and raise costs for everyone.

I do sometimes worry that the tendency of the insurance industry to always see criminal intent in the place of honest error by employers may result in some employers being falsely charged (and perhaps even being convicted). But today's rant isn't about that.

It is instead about this case I'm currently working on. We had a mediation last week, because the insurer (one of the big major insurance companies) has sued an employer for about Two million dollars of additional premiums for several years' Workers Compensation policies.

My major problem is that this big-time insurance company argued before the mediator (a retired judge) that a particular Illinois statute either does not cover Workers Compensation insurance, or else should be interpreted in such a way as to allow the insurer to be entitled to this two million dollars.

The problem is that I produced a memo from the Illinois Department of Insurance that had earlier gone out to all insurers in Illinois that explicitly explained that the statute did indeed cover Workers Compensation insurance, and that the interpretation advocated by the insurer is not correct.

Additionally, I have learned that people at the Illinois Department of Insurance had ongoing communications (including a video conference) with representatives of this very same major insurer, explaining in detail how this statute does apply to Workers Compensation insurance and how the self-serving interpretation advocated by the insurer is wrong.

So let me ask a question. If it is fraudulent for an employer to misrepresent the amount of payroll used to compute Workers Comp insurance, or to misrepresent the nature of the work done, in order to lower Workers Comp premiums, how exactly is it not fraud for an insurance company to seek two million dollars of Workers Comp premium in contradiction to the established statutes and regulations that govern Workers Compensation insurance?  Just askin', as they say.