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.