A Win at the Illinois Workers Comp Appeal Board

 I got word late yesterday that my efforts on behalf of a small Illinois roofing company, before the Illinois Workers Compensation Appeal Board, were successful. The board assigned Code 5606, the Executive Supervisor's class, to a worker of his that had been classified as a roofer.

The insurer had been rather stubborn about this, it seemed to me, and I did not believe their justifications for this classification change held up to scrutiny. The board agreed, I guess.

The representatives sent by this particular insurer definitely gave off something of a negative vibe about my involvement in this dispute--in fact, they tried to get me knocked out of the box on a technicality. This was unsuccessful, much to my personal satisfaction. But more importantly, the board agreed with our arguments and assigned the less expensive classification to my client.

A certain level of personal antagonism has historically sometimes crept into my efforts on behalf of policyholders over the years, with some insurance company personnel really disliking the very existence of someone like me, and my company. Fortunately, this is far from universal. A lot of insurance company folks are pretty cooperative when we ask them to correct premium overcharges for our clients. Heck, I even get hired occasionally by insurance companies to serve as an expert witness in legal disputes.

But I don't expect to get hired anytime soon by the particular insurance company that was on the losing end of this latest Appeal Board ruling, judging by the frosty attitudes of the folks at that hearing. And that's fine, that just comes with the territory, I guess.

In my younger days (I've been doing this kind of work a long, long time) I could sometimes get a little frosty myself, I think, when I encountered resistance from insurance company audit managers over correcting some technical errors for my clients. I like to think that I've mellowed a bit since then. 

But I still believe passionately in my work, don't get me wrong. 

That's why a relatively small case like this one still means a lot to me. I mean, I make my living finding and fixing insurance company errors in underwriting and auditing, but it's never been just about the money. Far from it. 

I've been incredibly fortunate to find a line of work that satisfies my need to make a difference in some way and also lets me pay my bills as a truly independent small business. In a world that is increasingly dominated by large firms buying up smaller ones, I get great satisfaction from doing things my own way, as captain of my own (admittedly tiny) ship. And somehow, I've managed to do that since 1987.

Even if occasionally I step on some toes within the insurance industry. 

Thanksgiving thoughts

 

A Sobering Phone Call Yesterday.

 I got this phone call yesterday, from a small contractor in Virginia, and it was genuinely sobering. I think it puts into perspective the problem I have tried to bring attention to, about how, for small construction businesses across America, Workers Compensation insurance audits can be much bigger source of stress than they should be.

This gentleman gave me a little background information. He said he is a combat veteran and also a former FBI agent. And after taking medical retirement, he decided to start a small construction business. And it has suited him, he said.

But the other thing he said was that his upcoming Workers Compensation insurance audit was keeping him up at night. 

"There's so much that wasn't explained to me," he told me. And that is a common complaint I hear.

He was sold a Minimum Premium Assigned Risk policy for a low premium. And it's only now he's learning about all the various aspects of these premium audits that may potentially turn this minor expense into a business-ending financial land mine.

I spent some time explaining all the stuff that should have been explained when he first bought that policy. I thanked him for his service, too, by the way.

And I thought about how wrong it felt that a guy who had seen combat in service to his country, and then further served us all in the FBI, now told me that he was stressing over this insurance thing more than he had ever stressed over his past perilous service.

That's not right.

Anyhow, I'm going to help him make sure his audit is done properly and that he has together all the paperwork and documentation he'll need to at least avoid the common kinds of overcharges that can occur with these audits. And I'll also help him dispute any overcharges that do get through the audit process, in spite of our efforts.

He was genuinely grateful to hear all that. I hope it helps him sleep a little better. And I hope we can help him keep the audit bill from being his worst nightmare.

We shall see.

An Egregious New York Overcharge by a Billionaire's Insurance Company

 I've got a new case out in New York that really exemplifies what's wrong with the Workers Comp insurance system, especially in regards small businesses. This is still a pending dispute, so I'll have to change the names to protect the innocent and guilty alike.

This small business does a combination of landscape work and what he calls "hardscape" work--the hardscape work is stuff like putting in paving blocks and retaining walls. His policy was written with Code 0042, the code for landscape work. But when the audit was done, the insurer changed the code to the Masonry code. So the rate went from a $6.00 rate to a $24.00 rate. And in order to do this, this well known insurer (owned by the conglomerate of a certain Wizard-like investor out in Omaha) contacted the New York Compensation Insurance Board and told NYCIRB that they wanted permission to make this class change because the insured did only masonry work and didn't do any landscape work. So NYCIRB said, well okay, we'll approve this unless someone squawks. And no one squawked to NYCIRB, at least not until I was hired, because the policyholder didn't know that NYCIRB existed.

But the policyholder had squawked about this audit--he had disputed the audit with the big time insurance company. But that did no good, and the insurance company turned the matter over to a collection attorney who did the usual job of applying pressure on the policyholder.

But here's the thing--the insurance company lied (sorry, misrepresented) to NYCIRB about the nature of this policyholder's work. The insurer said this policyholder did no landscape work, only masonry work. Then the insurance company lied (oops, misrepresented) to the policyholder, telling him that it was NYCIRB that had caused this classification increase and that the insurance company had no choice but to go along with it--even though the truth was that it was the insurance company that had initiated the class change and had only gotten NYCIRB to okay the change by misrepresenting the nature of the insured's work.

It gets worse. 

The collection attorney kind of expressed some mild annoyance, saying that the dispute had already been presented and rejected. Of course, said 'dispute' was handled by the insurance company itself, the same outfit that had made the original egregious error in classification in the first place. And the fact that the insurer took a second look at this and insisted that they were right just tells me this was no innocent error--it was a deliberate overcharge, it would seem. Let me explain, in another paragraph or two.

The collection attorney also wrote that since the audit had been done by an outside "independent" audit firm, it gave an additional level of legitimacy to this audit. 

But of course, "independent" audit firms are merely vendors to insurance companies, hired by and paid by the insurance company. There is little genuinely independent about that arrangement.

But here's what really frosts my pumpkin—the original classification code, as written by NYCIRB, explicitly states that it is designed for companies that perform landscape work and install paving blocks and retaining walls, which is exactly the work done by this policyholder.

Now, we're currently working with NYCIRB itself to correct this problem. And I have high hopes they will do the right thing. But until this is finished, I won't breathe easy.

I often say that, in a perfect world, I should have to do something else for a living. I really shouldn't be able to have, as my profession, the unique vocation of catching and fixing errors by the insurance industry in figuring Workers Comp insurance premiums. These errors shouldn't be so common, so costly.

But guess what. I've made my living doing exactly that since 1983.

Look, anyone can make an error in judgement, I get that. But in this case, the NYCIRB manual makes it clear that Code 0042 is intended to be used for companies that do landscape work but also do paving blocks and retainer walls. You know, exactly what this policyholder does.

Yet the insurance company told NYCIRB that this policyholder did no landscape work at all, in spite of having been given documentation by the policyholder that showed they did exactly that. (You know, in that original "dispute" handled by the insurance company itself.

Look, if a policyholder did something like this, he might well be accused of insurance fraud. God knows, in places like California, I've seen policyholders criminally prosecuted for much less obvious classification issues.

But sauce for the goose is not sauce for the insurance industry gander, in this regard. Hell, the California statute about Workers Comp premium fraud applies only to policyholders, not insurance companies, not at all. You may draw your own conclusions from that.

Workers Comp Audit Problem for Florida Employers

 

New Initiative to 'Digitize' Workers Comp

 An email came across my desk today that intrigued me. It was an announcement of a new insurance industry initiative to digitize Workers Compensation insurance. You can take look at it: https://www.wcdigit.org/

Now, here are my initial thoughts on this. I'm a big believer in unintended consequences. And I currently get a lot of work from the current Workers Comp insurance system that overcharges a lot of employers through technical errors. I suspect this digitization thing might put that sort of thing on steroids.

And worse, this new initiative says one of the benefits of this digitization thing would be to somehow automate fraud detection. That worries me.

Because we already see a steady stream of work from California, where employers are often charged with criminal fraud over honest mistakes in filling out forms about their Workers Comp insurance. That's because California has enacted statutes that make it easy to accuse employers of criminal fraud over their Workers Comp insurance premiums. If that kind of thing gets automated, with algorithms created by the insurance industry, I suspect our workload will considerably increase in the portion of my consulting work that involves helping to defend employers against bogus fraud charges.

Sigh. Brave New World.

California Construction Company Blues

 

Time Flies

 

Workers Comp & Me

 

Update On My Last Post

 I may have been premature in my last post about a small Georgia contractor being crushed by a Workers Comp Shock Audit. We've figured out how to reduce this audit by just enough to keep them in business, when combined with our negotiating on their behalf to work out a payment plan for the remainder of the audit.

Mind you, it's still quite a large bill--hence the need to work out a payment plan. But the client feels that, with the reductions we can produce, the remaining audit bill can be handled, if we can work out a reasonable payment plan.

My son and partner here, Scott Priz, who is also a talented and resourceful attorney, is going to handle correcting the audit and negotiating a payment plan. He's extremely good at both. So it looks like we'll be able to help this Georgia small business stay in business, albeit with a painful bill to still handle.

But it's better than what I initially feared would be the case.

Another Small Business Destroyed by Workers Comp Insurance

 I just had to write a very frustrating email to a potential client, a small construction company in Georgia. They bought a Workers Comp insurance policy for $1,500 and now have an audit bill for $136,000, and I don't see any way to help them--outside of a courtroom, at least, I'm not an attorney but I do a lot of expert witness work in litigation over Workers Comp premiums. But fighting these kinds of audits is expensive, with no guarantee of success.

The trap this small business fell into is one I see often. The people selling the insurance sell them what is known as a Minimum Premium policy, without explaining that the ultimate premium could well be much, much more. Typically, the insurance agent doesn't do a very good job explaining how the insurance company typically charges premium for uninsured independent contractors, the same as for regular W-2 type workers.

And the shitty thing is, insurance agents typically aren't required to explain that kind of thing. Because insurance agents aren't held to the kind of professional standards that attorneys or accountants are. Insurance agents generally only to have to be an honest order taker. If they get you the insurance you asked for, and don't steal your money, they've typically satisfied their legal requirement. It's only if they voluntarily act as an insurance advisor that an agent can create for himself or herself a higher duty to actually offer accurate and reliable advice.

It's actually a common practice for insurance agents to sell these Minimum Premium policies to small contractors and never warn them about the possible ruinous consequence of a huge premium audit after the policy expires. I get calls and emails all the time about this issue, Sometimes, I can help reduce the bill. This time, it doesn't look like I can.

Insurance regulators and insurance companies often claim that Workers Comp insurance is the most regulated line of insurance, and that's technically true. Yet for something supposedly so regulated, insurance companies sure as hell get away with destroying a lot of small businesses, when Shock Audits for Workers Comp arrive in the mail.

This problem could be fixed, if so much money wasn't made with the existing shitty system.

For instance, insurance agents could be held liable for providing genuine advice about these kinds of things, by statute, instead of being left with no more liability than a kid working at McDonald's.

Or limits could be placed on the ability of insurance companies to issue audit bills that are far, far in excess of what the original policy premium was.

Or states could establish requirements for clear and understandable warnings to be given to businesses about this potential audit landmine, at the time they purchase Workers Comp insurance.

Or states could create administrative systems with authority to provide clear guidance to employers about when an independent contractor is subject to the Workers Comp Act, and when they are not, an administrative system that doesn't require fighting an expensive lawsuit.

But at the moment, small companies, especially small construction companies, continue to exist under this existential threat of obliteration by their insurance company, over insurance coverage they are forced to purchase. No other industry I can think of could operate in such a fashion, selling a product initially priced like a bicycle but later sending a bill for a goddamn Ferrari.

Keep Those Cards and Letters Coming In, Folks

 Just about every business day, we get a phone call or email from some employer somewhere in the U.S. who is facing what we call a "Shock Audit" for Workers Comp insurance. Today's call is from a California construction company that is on the receiving end of a Shock Audit for $100,000 of additional premium.

As I told this worried gentleman, I can't promise we can help his particular situation, but I'll be glad to take a look at it to see if we can. I mean, we can help an awful lot of the people who reach out to us, but not all of them. But I'm always happy to take a look at the audit documents to see what might be done for a particular employer.

Another thing I say a lot is "in a perfect world, I should have to be doing something else for a living." I mean, if the Workers Comp insurance system ran fairly and smoothly there wouldn't be so many problematic premium audits--and certainly not so many of these Shock Audits that are excessive and plain old wrong. 

Don't get me wrong--I'm happy to be in demand. And thanks to the wonderful reach of the internet, employers all over the country can find us and seek help. That wasn't the case when I started Advanced Insurance Management, back in 1987. Of course, nowadays it isn't just me doing the helping.

My son, Scott Priz, joined the firm back in 2003, after graduating from the University of Chicago. And to my delight, he took to this unusual line of work with alacrity and enthusiasm and has helped more than his share of our clients over the ensuing years. And then, a few years back, he took a further step--he got his law degree, bringing a whole new level of expertise to the mix. Scott brings a rather unique combination of expertise to bear for clients--more than twenty years of experience as a consultant on Workers Comp audits and premiums, along with admission to the bar. It's a powerful and rare combination.

There's another thing I say a lot, as well. "Insurance may be the middle name of my company, but we don't sell insurance. We fix it." Because we don't sell insurance. We specialize in fixing insurance industry errors in Workers Comp classifications, audits, experience modifiers, and premium charges. But we don't compete with insurance agents and brokers. We're genuinely independent consultants who specialize in a unique service.

Some folks in the insurance industry get rubbed the wrong way when I talk like that, I know. When I gave a presentation at a local meeting of premium auditors a while back, I could sense a fair degree of skepticism from the audience--even some hostility, I think. But facts are facts. The majority of the people who reach out to me have been overcharged on their audits. And that's proven by the fact that, in most of those cases, I'm able to get those audits reduced significantly.

Remember, no one reduces an audit bill just because I ask nicely. No insurance company changes classifications or payrolls or premiums just because they like me. A lot of them aren't exactly in my fan club, I figure. They correct those audits and reduce the charges because I identify and document errors in how the premiums were calculated. And under the rules, insurance companies have an obligation to calculate those premiums correctly. 

It's just that a lot of these Shock Audits haven't really been calculated correctly. And that's where I come in. I know how to dispute premium audit charges, and dispute them successfully. 

So anyway, keep those cards and letters coming in, folks. Or in this day and age, emails and texts. I'm always glad to take a look.

All About AIM

 I just got this in the mail today from the Better Business Bureau, signifying that Advanced Insurance Management LLC has been a member in good standing since 2005--so going on 20 years now.

In all these years, we have also been "Complaint Free" per the BBB.

The reason I've felt that BBB membership is important to our little company is that we provide unique business services, services that are something of a new concept for most of our prospective clients. So I've always felt that BBB membership is one important benchmark a prospective client can use to evaluate us and our unique services.

We don't sell insurance, after all. In spite of having "Insurance" as our company's middle name, we're not insurance agents or brokers, and we're not an insurance company. Instead, we help businesses to find and correct technical errors in Workers Compensation insurance premiums, errors that have caused significant premium overcharges.

So we check over Workers Comp audits, classifications, experience modifiers, and other technical rating factors that directly impact the premiums that employers have to pay for their Workers Compensation insurance. And when we find errors that have caused our clients to have overpaid, we then work to get that money back for them.

I often like to say, in a perfect world, I should have to do something else for a living. But we don't live in a perfect world, and overcharges by insurance companies for Workers Comp insurance remain a persistent and ongoing problem for business owners and managers.

And we're still here to help. I started this business in 1987, and I'm not planning on going anywhere. Of course, nowadays, my son Scott is also carrying on the family tradition, so even when I eventually have to hang up my spurs (not for a long time, hopefully) Advanced Insurance Management will still be providing our unique assistance to employers.

Consent to Rate Filings by QBE Insurance

 We've just come across something I think worthy of comment, something that seems...unusual, at the least. We;ve discovered that QBE Insurance is using Consent to Rate filings on a large scale basis to get the Workers Comp manual rates for individual policyholders significantly increased. We've found numerous filings in Georgia and Illinois but my suspicion is that if we look, we'll find the same thing going on in a number of other states as well.

What's the significance? Well, for one thing, I think a lot of companies kind of operate on the assumption that the manual rate used for Workers Comp classifications are largely uniform. Now, in recent times, that isn't exactly so, as insurers in a great many states are free to file their own schedule of rates for Workers Comp insurance.

But Consent To File allows insurers to use higher rates that apply just to a single policyholder. But they're doing it for a lot of individual policyholders, it seems.

The potential problem, I think, is that some of these policyholders may not do much, if any, comparison shopping for their Workers Comp insurance. And so they may be unaware that they are being singled out, on a voluntary market policy, for the application of manual rates that are just about (or just slightly lower) than assigned risk rates.

This is all perfectly legal. But my advice, to anyone considering a Workers Comp proposal from QBE, would be to comparison shop the hell out of  your Workers Comp insurance. And don't rely on a single agent or broker, as they may have a financial incentive to sell policies with these higher rates.

What the Hell is Going On With the Georgia Assigned Risk Plan?

 Most of my readers already know what Assigned Risk Plans are, for Workers Compensation insurance, but for those who perhaps don't recall, Assigned Risk Plans, although they vary from one state to another in the details, are all state-created programs to make sure that Workers Compensation insurance coverage is always available to employers, even when insurance companies don't want to voluntarily underwrite WC coverage for a particular employer. Typically, the cost of the coverage is higher than it would be through the so-called "voluntary market" but employers can get the required coverage, even if an employer is too small, or too new, or too risky, in the eyes of insurance companies.

In recent years, I've been getting a lot of calls and emails from small-ish Georgia construction companies, though, about what I've come to call "Shock Audits" for Workers Comp. And over time, what I've been seeing is leading me to the conclusion that something is deeply wrong with the Georgia Assigned Risk Plan, particularly for small to medium-sized construction companies.

Consider just two recent Georgia employers that have reached out to me in the past week or so:

Case 1 is a small construction company that was sold an Assigned Risk policy for Workers Comp with an initial premium of $1,500.00. This small hispanic-owned business has now been sued by Liberty Mutual (the assigned risk servicing carrier that wrote coverage for this contractor) for just over $2,000,000.

Case 2 is another small Hispanic construction company that bought an Assigned Risk policy in Georgia for around $1,500. This one has a collection agency calling, because the Assigned Risk insurer says he owes around $500,000 for the insurance coverage.

Seeing a pattern here? Small, unsophisticated contractors are sold inexpensive Workers Comp policies, only to have this required insurance blow up on them after the policies end, with staggering bills for additional premiums.

These are far from the only such cases like this I've seen--these are just the two that have called in the past week or so. And the more I look into these cases, the more questions arise.

For one thing, as I've examined the Georgia Assigned Risk plan rates, I've learned that the rates are astonishingly higher than Assigned Risk rates in other states.

Consider the Georgia 2024 Assigned Risk manual rate for classification 5645, which is the class with the most payroll assigned to it. That manual rate is $103.17 per one hundred dollars of payroll. 5645 is the classification for carpentry work on construction of residential buildings.

And so, for every one hundred dollars paid to workers, the Georgia Assigned Risk Plan wants one hundred and three dollars.

For comparison, the Illinois Assigned Risk rate for Code 5645 is $31.14 in 2024.

Now, Illinois tends to be a state with relatively good benefits for injured workers. It's not like Indiana, with relatively crappy benefits. Yet the Assigned Risk rate for Code 5645 is a third of the Georgia rate.

And if you compare the reported cost of claims in Georgia and Illinois (which the National Council on Compensation Insurance does) the average cost of claims under Code 5645 in each state is much closer (although Georgia is higher than Illinois.)

In Georgia, NCCI has calculated that the average cost of claims under Code 5645, for 2024, is $12.88 per hundred dollars of payroll. In Illinois, the average cost of Code 5645 claims is $7.03 per hundred dollars of payroll.

To make matters worse, in most of these Georgia Shock audit cases I see, the insurance company has placed the payroll for these small construction contractors into Code 5645. I guess maybe that's why, according to NCCI, code 5645 is the Georgia classification with the most payroll assigned to it.

So what the hell is going on with the Georgia Assigned Risk Plan?

I don't know yet. But I'm gonna find out. Stay tuned.

A Win For The Books in Georgia

 We just received notification of a win for a client down in Georgia over proper Workers Comp classification of their business. And this one is one for the books.

I had made a presentation on behalf of this client down at the Workers Compensation Appeal Board about a month ago. I thought we had a rock-solid case. I advocated to reverse a recent NCCI inspection that had assigned a much more expensive classification to this client. I made a strong case that the newly-assigned classification was wrong and that the Appeal Board should assign the less expensive class that this client had for years and years, before the inspection.

In spite of what I thought was a very persuasive case, we lost. The Appeal Board instead ruled that the much more expensive class should stand.

I was honestly surprised. And we were assisting this client with the further appeal of that decision when this notification arrived today. From the Georgia Department of Insurance.

The Georgia Department of Insurance overruled the Appeal Board and reinstituted the cheaper class I had been advocating for. Without the necessity of our even filing an appeal.

In all my years of doing this kind of work, I have never seen something like this. I have never seen a Department of Insurance overturn a decision by a Workers Comp Appeal Board without our having to even make an appeal of that decision.

I'm delighted by this turn of events, of course. And I'm intensely curious regarding what the heck happened, behind the scenes. I mean, the Department of Insurance had a representative at the hearing, a voting member of this Appeal Board. So someone at the department knew the arguments I had made and had heard the testimony of the business owner.

So now, on to my next case. Cases, actually, as in the plural. We keep getting phone calls and emails just about every day from small and medium-sized businesses, across the country, who need help disputing Workers Compensation insurance classifications and premium audits. Got two this morning, from different parts of the country. So I'm going to be a busy little insurance consultant, it seems, without too much time for resting on my laurels after this unexpected notification. But that's fine by me.

The Kind of Thing That Makes Me Angry

 I'm currently working on behalf of a small construction company. On their last Workers Comp audit, the insurance company couldn't be bothered to send out an auditor. So they instructed the policyholder to fill out a self-audit form. And the construction guy, trying to do the work of a trained premium auditor, made some mistakes. He caught them after he sent in the form, but the insurer wouldn't revise the audit. So he hired us.

As a first step, we went to the Dispute Resolution process offered by NCCI. I explained the problems--a guy who belongs in the clerical code got assigned to the carpentry class. Plus, I found that this company didn't even belong in the carpentry class--they are a painting company, and properly belong in the cheaper painting classification.

Insurance company just gave their official reply to NCCI. They told us to pound sand. 

Now, this galls me, because I know from experience that insurance companies routinely change these audits when it benefits them, sometimes years later. But when the policyholder wants to fix things, because construction guys aren't so well trained as premium auditors, the insurance company says "No takebacks."

My own initial first response is something less polite and more of an Anglo-Saxon type of exclamation. But that won't get us anywhere.

So now I have to roll up my sleeves, put on my thinking cap, and figure out how best to fight this. Because NCCI has kind of just shrugged at this non-response by Pekin Insurance and asked us if we can prove our assertions. And we're certainly looking into this.

But the thought occurs to me that is a classic example of how the system is not a level playing field. and how the insurance oversight system is not exactly a consumer-friendly system, in spite of places like NCCI having some very dedicated and helpful people. The system just is designed to put the burden of proof on the policyholder, Instead of insisting that insurance companies actually have to bear the expense and effort of getting these audits right, the system tends to push that off onto policyholders. Kind of like a mandatory self-checkout lane at Wal-Mart. Where the scanner sometimes reads a bag of apples as a vacuum cleaner.

Well, the game is afoot, I suppose. Time to see if I can make Pekin Insurance do the right thing. Stay tuned.