1. Why is my policy written with such odd dates? Can I change the dates?
Your policy dates can be changed by cancelling and rewriting the insurance policy. There are implications of this for workers compensation insurance due to the need to report consistent data for rating, so you will want to discuss with your agent to discover what will happen if you change to standard year end or quarter end dates.
2. Why should I provide the audit information?
Lots of reasons, including maintaining a good relationship with your insurance company.
If the company cannot get data from you for the audit they will need to develop some other source that might not be as accurate. The Insurance Company has an obligation to report exposure information from all policies for ratemaking purposes.
Accurate information will help keep your discounts maximized as well as your experience modification, which can reduce your premium every year and is based on premiums and losses.
Your insurance policy requires you provide the insurance company with the information they need to perform the final audit.
3. Do cash workers need to be included in the audit? Why?
Cash workers are your employees and entitled to file for claims on your workers compensation policy and also create exposures for your general liability policy. You must report the total amounts you paid these people during the policy period.
Some employers have a “probation period” for new employees when they pay them cash wages. All of these cash wages must be reported.
4. Why are certificates of Insurance needed for the audit?
Certificates of Insurance (COI) are important evidence that the independent contractor you hired has their own insurance. You should receive a COI from the agent for each subcontractor, and that agent has an obligation to notify you if the policy is cancelled, as long as they sent you the original certificate.
Fraud schemes sometimes involve photocopying a certificate and sharing it among several “independent contractors”. You should receive your own COI from the agent.
5. Why do Insured subcontractors need to be included for general liability?
There are many exposures created by the existence of the subcontractor and you need to be sure they have taken care of their obligation to you to properly insure themselves. Here are a few examples of possible exposures from Insured subs:
- A subcontractor’s policy has very low limits of coverage and in a large loss situation cannot pay the claim that occurs
- Subcontractor refuses to take responsibility and tells you to sue him if you want his policy to respond.
- Subcontractor gets hurt on the job and sues you
- Subcontractor causes a loss then disappears never to be heard from again, and the subs insurance company says the loss was not their insured’s fault and they won’t pay
6. Why are liquor sales used twice on general liability?
There are 2 different exposures for a restaurant that sells liquor.
- Operations exposure from the glass, ice cubes, and liquid as well as the act of serving to the customer – all are included in the premises and operations code for restaurants.
- Liquor liability exposure from the effects of the alcohol on the customer, the inebriation effects.
7. What makes an executive supervisor different from other construction employees?
Executive supervisor has more decision making authority than other employees and has direction and control over the entire construction operation.
Executive supervisor does not directly supervise workers and NEVER does any hands on labor work. There must be at least one level of supervision between the executive supervisor and the workers-meaning a foreperson who actually supervises the workers, and is the only person the executive supervisor talks to.
Executive supervisors spend most of their time in the office of talking to customers, architects, etc. They occasionally visit a job site also but this is not their main duty.
Executive supervisor code can only be used for workers compensation construction codes – cannot be used for manufacturing or service businesses.
8. What is the difference between warehouse and wholesale store?
This is a common error we see on policies, where a warehouse code 8232 is used for storing a product owned by the insured. Storage of the insured’s own products is intended to be classified code 8018 wholesale store.
Code 8232 warehouse is only used when storing products owned by others such as a moving company might do or a public warehouse.
9. Why can’t I break out travel and office time for my travelling workers?
Classification codes are intended to classify a business and not separate jobs within the business. For example a plumbing business is rated code 5183 plumbing and all the jobs the plumbers perform are included in that classification. We do separate time the plumber spends
This is the same reason we do not split clerical code 8810 with other codes – all jobs have some clerical components and these are normal and incidental to all people in the same job classification.
10. What is the difference between expenses and allowances are both excludable?
Expenses are actual documented expenses incurred and reported using an expense report, and represent reimbursements to the employee. These can be deducted from the exposure base, so things like moving expense and gas expense can be deducted.
Allowances are amounts paid to employees who would be likely to incur the expense but with no evidence they actually did incur the expense. These are normally flat payments for things like travel and moving and are not excluded from the audit because there is no evidence that an expense actually occurred.
11. Why do I need to provide payroll for a garage liability audit?
There are different types of garage liability
- Payroll based garage liability relies on actual payroll usually with a maximum weekly payroll applied – the auditor needs actual payroll and weeks worked to properly limit the payroll.
- Per Diem based policies use days worked as a basis of premium; however actual payroll records are the only way to verify the actual days worked, so payroll records should be a source document to properly verify the audit.
12. I have a new insurance company – do I still need to do the audit?
Yes it is very important to still do the audit. You need to know that your premium was accurate – you certainly do not want to overpay.
Your rates are calculated partly based on your company’s history of premiums and losses regardless of which insurance company you have during any given year, and you want that history to be accurate. If you provide your audit data every year then your data will be the most accurate possible.
You are obligated by the contract of insurance to provide the information.
13. Do I include terminated employees in the audit?
Yes always include everyone who was employed during the policy period.