Workers Comp Audit SNAFU in New Jersey

 Let me share a little detail from a new case of ours, involving Workers Comp audits for policies in the New Jersey Assigned Risk Plan. This detail illustrates the kind of extreme, one-sided thinkiing that all-too-often we see in Workers Comp audits by insurance companies.

In this case, the insurer has retroactively moved all payroll for five past years into the very-expensive roofing classification. The reason, per the audit notes: out of $454,0,000 in payroll, there was a single $800 check that was labelled as being for "roofing labor".

That was it, that was the basis for all payroll being retroactively moved to a classification with a rate double the rate originally used for this client. Even though it's fairly obvious that most work done by this policyholder properly belonged in the cheaper class. But because insurers know that the obscure manual rules that govern Workers Comp policies, rules not spelled out anywhere in the actual policies themselves, can be retroactively interpreted to allow such behavior, insurers often pull this kind of "Shock Audit" sleight-of-hand. Years after the policies have ended.

So policyholders who get hit like this think their Workers Comp costs will be one thing, only to be informed years later that the insurance company is insisting the actual cost is twice what the policyholder was originally led to think.

And when the policyholder doesn't pay these revised bills, the insurer typically files suit. And that's when someone like me becomes necessary. Because insurance companies routinely produce affidavits and testimony from their own employees that all these premiums are properly owed for the policies.

And since most people who understand the arcane and obscure rules that govern Workers Comp premiums work for insurance companies, disputing those premium charges requires someone who also knows those arcane and obscure rules. Someone who is not employed by the very same insurance company seeking those substantially higher premium charges.

It reminds me of something I used to tell folks. Would you let the IRS figure your tax bill, without having your own expert independently review those calculations? 

When large sums of money have been calculated and sought based on complex and technical rules, rules not generally well understood, I think it makes sense to have an independent expert review those calculations. And that's where I and my team at Advanced Insurance Management come in. I've been doing this kind of independent review of Workers Comp insurance audits and premiums since the early 1980s, and I've found that self-serving errors of judgment by insurers are alarmingly common.

I've worked with employers large and small, all across these United States, and the frequency of these self-serving errors of judgment regarding Workers Comp audits and premium charges has consistently and persistently been shockingly high.

What was that Russian proverb Ronald Reagan once cited? Trust, but verify.

Busy, busy, busy

 Keeping busy these days, which is always a good thing. Flying out to California next week to testify at another trial out there over Workers Comp insurance. But first I have to complete a report on a California criminal case over Workers Comp premiums, have a Zoom with insurance company lawyers over a different Workers Comp dispute, talk with Georgia lawyers over a mediation over Workers Comp premiums, and review documents for a New Jersey case over disputed Workers Comp premiums.

I remember, when I started my consulting practice back in 1987, I had to spend time each day cold calling prospects. Fortunately, I was pretty good at that aspect of the business. Nowadays, it’s much more difficult to cold call, I think. I don’t do it myself but I help our dedicated people who still do it. But for a lot of my work, when people need me, they find me. 

And there seem to be a lot of people who need me these 

A Shock Audit from South Carolina

 Shock audits for Workers Comp insurance happen all over the U.S. I know, because I get calls and emails almost every day from some small business, somewhere in the United States, that's been clobbered with one of these Shock Audits.

This South Carolina small flood restoration business bought a Workers Comp policy for around $1,000.00. Now they have an audit bill for $77,000.00.

This is for a policy that didn't even last a year. The insurance company cancelled them after eight months when the policyholder dared question a change to the policy that suddenly caused a $28,000 bill for additional premium.

Fortunately, my initial review finds that an awful lot of that audit bill can be removed, once all the various mistakes the insurer made are corrected. And there are multiple mistakes, mainly over classifications but also about independent contractors being improperly included.

The insurance company did an audit for this policy--sort of. Judging from the results, it was an audit in name only. No actual effort appears to have been expended to determine the actual proper classifications and payrolls--the insurer's people just quickly and conveniently applied an extreme, worst-case scenario to every potential question, billed that out, and moved on to the next victim--err, policyholder.

But these errors are very fixable. And they will be.

As I often say, in a perfect world, I should have to be doing something else for a living.

We do not live in a perfect world, alas.

Interesting Deposition Today

 Had another deposition taken today in another California litigation, and opposing counsel asked a question that I hadn’t anticipated. He asked how a Chicago based expert would know anything about California Workers Comp insurance premiums.

And I had to smile to myself, because California has become one of two hot spots for my work in recent years, (the other is Georgia) so much so that I don’t think much about the geographic distance nowadays.

In this modern age, I was having my deposition taken via Zoom, for example. And internet and inexpensive phone service have rendered what once might have been significant geographic barriers into near nonexistence.

Sure, when I started my consulting practice back in 1987, my clients were largely local. But that was a different age, a different world . 

And it certainly is true that California has distinctly unique aspects to Workers Comp insurance premium rules.  But since the advent of the internet, I’ve had lots of California clients, and so lots of experience with the unique elements of Workers Compensation insurance in the Golden State.

Like I said, California has become a hotspot of demand for our particular consulting services, both for civil cases and criminal cases involving Workers Compensation insurance premiums and audits. I’ll be traveling there in two weeks to offer testimony at a trial there, and I’m scheduled to be back there in early February to testify at another trial.

Back in 1971, the Ides of March sang about LA being light years from Chicago, but nowadays, not so much for this particular son of the South