A Workers’ Compensation policy may be modified during the policy term or upon renewal for various reasons. This is done with a request that typically stems from business changes discussed with the insured’s agent or broker and communicated to the Workers’ Compensation carrier. Sometimes, the carrier will initiate the request, as in the case of a policy audit that indicates payroll changes. Some endorsements are premium-bearing while others are not.
Here we look at typical endorsements made to a Workers’ Comp policy.
Payroll Changes
Payroll is one of the key factors in determining an employer’s Workers’ Comp premium. At the outset of the policy period, the insured provides an estimate of the operation’s payroll, which is later reconciled via an audit the carrier performs. If there are no changes to classifications and actual payroll exceeds the estimate, the policy is modified and an additional premium may be due. The converse applies if the actual payroll is lower than the estimate, with the insured likely to receive a return premium.
Another example of a payroll change endorsement request would be when an insured contacts their agent to advise them of a business expansion when purchasing a new facility and hiring additional employees. Conversely, if the business downsizes with fewer employees and corresponding less payroll, this could also be reason for a midterm endorsement. Midterm payroll-based premium changes occur for policies that are not on ‘pay-as-you-go’ or ‘monthly payroll reporting’ type payment plans.
At Prescient National, it’s very important for us to quote based on the most accurate payroll estimates possible, with the goal of achieving low-to-no variance audit results. We start by sending a letter to the insured a few months before renewal with a request for any updates that may impact their payroll amounts for the expiring and upcoming policy terms. From there, our Underwriters collaborate with our agency partners to ensure the best payroll estimates are used to price and quote insurance policies.
Location Changes
If an insured changes location or business mailing address, this will generate a non-premium bearing policy endorsement request as long as the location change does not impact the company’s payroll. Prescient National wants to make sure that all location schedules are current.
Ownership Changes
As discussed in a previous article, if there is a change in ownership status, employers in states that use the National Council of Compensation Insurance (NCCI) must report the change to their carriers within 90 days by completing the ERM-14 Form. Once NCCI reviews and comes to a determination on experience modification impact and any applicable legal entity status changes, they update their records and send a letter to the insuring carrier which outlines the necessary endorsements that are to be made to the applicable workers’ compensation policies as a result. Entity changes may include the business’s going from a sole proprietorship to an LLC, a merger or acquisition, or an ownership transfer to another party.
The combinability ruling which NCCI, or the applicable independent rating bureau, makes as a result of an ownership change may affect whether the new entity can cover its employees under a single Workers’ Compensation policy. The loss performance and operational size of each entity involved in a merger are both major factors which could impact the applicable experience modification factor of the acquiring business or parent company. It may also impact the experience modification factor if one company’s loss history is poor. In this case, if the combined experience between the merged entities shows a less favorable window of data than before, with more actual losses than expected losses, the newly promulgated experience modification factor for the operation would suffer.
Waiver of Subrogation Endorsement
Businesses are sometimes asked to include a waiver of subrogation in their Workers’ Compensation policy. With a waiver of subrogation clause, a Workers’ Comp carrier waives their right to seek damages from another party if that party is found to be liable for an injury. The Workers’ Comp carrier will cover an injured employee’s medical bills but cannot pursue damages from the party named in the waiver to recoup its payment.
For example, let’s say a plumber is working on a building and suffers an injury due to the negligence of a carpenter working on the roof who accidentally drops some tools on the plumber’s head. The plumber’s insurer would cover that workers’ comp claim. If the plumbing contractor’s Workers’ Compensation policy had either a Blanket Waiver of Subrogation or a specific waiver naming the carpentry company, the carrier would not be able to seek damages (subrogation) from the carpenter’s insurer.
Waivers of subrogation are often requested in the construction and staffing industries and can be premium-bearing endorsements. Some insureds request blanket waivers, while other waivers are project-specific.
Safe Workplace Credits
Some states will allow employers to receive premium credits on their Workers’ Comp policies for a safe or drug-free workplace if they meet the requirements. Some states will provide certificates to employers to submit to their Workers’ Comp carriers to qualify for the credit.
About Prescient National
Prescient National provides companies with Workers’ Compensation insurance solutions. In addition, we help clients look at the impact safety can have on their organization, including the potential savings they will experience. This begins with assisting clients in implementing strong hiring practices, understanding job requirements, and bringing on employees who are fit for duty using a post-offer medical questionnaire (POMQ).
We utilize data-driven analysis, including the adjuster’s investigation, to determine where improvements can be made to mitigate a similar loss or improve the outcome of a claim. Our goal is to provide critical information that can be used as a teaching tool for the employer to make changes that will improve safety and productivity in the organization.
