A colleague of mine shared an incredibly valuable site he ran into as a claims advocate for our commercial clients. This site by PENN Law tracks various stages and appeals on COVID insurance claims.
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WC Premiums and “Idle Time”
Wages paid to employees not actively working is nothing new. So how are wages handled for WC premiums if the employees aren’t actually working? Despite what many of us might think, determining what payrolls to charge for is not entirely to the carriers or auditors. This is actually up to the regulatory bodies in each state. For example, the Pennsylvania Compensation Rating Bureau specifically addresses “Idle Time” in their workers’ compensation manual.
PENNSYLVANIA WORKERS COMPENSATION MANUAL SECTION 1 UNDERWRITING RULES EFFECTIVE DATE: APRIL 1, 2015 Page 24
Wages Paid for Idle Time a. The entire amount of wages paid for idle time shall be included as payroll. b. Wages paid for idle time due to the following causes shall be assigned in their entirety to the classification which applies to the work normally performed by the employee involved: 1. Suspension or delay of work on account of weather conditions. 2. Delays while waiting for materials. 3. Delays while waiting for another contractor to complete certain work. 4. Delays arising from breakdown of equipment. 5. “Stand-by” time where employees such as operators of cranes, hoists or other equipment are on the job but their active services are not required continuously. 6. Special union requirements or agreements between employer and employees calling for pay for idle time under specified circumstances. 7. Other cause of similar nature. c. Wages paid to key employees of construction, erection or stevedoring risks, such as superintendents, foremen or engineers, for periods during which no jobs are in progress, shall be assigned to the classification applicable to the work which each one normally performs. (Exception: Reference Strike Periods – Wages Paid.) d. The entire amount of wages paid for idle time to an employee engaged in work other than construction, erection or stevedoring must be assigned without division to the classification which normally applied to that employee.
OK, with that being said, what presumably wasn’t expected when this was written was what we’re seeing today with COVID-19 and the federal assistance that has come with it. Fast forward to today and your company has just received a PPP Loan- Congratulations, let’s hope we can keep our businesses alive until things get back to normal… One of the keys to the PPP loan is to use at least 75% of the loan for payroll, even if the employees aren’t actively working. Well regardless of what type of company you have or the rate for your WC, your most likely hoping to NOT pay WC premiums on wages made to employees not actually working… I don’t blame you. So you talk to your carrier, broker, or an auditor to get the answer. Depending where you are or when you asked you may not like what you hear.
As a result, regulatory bodies are working hard to find a solution for this new type of wage payment.
NCCI recognizes that the circumstances around COVID-19 were extraordinary and, as a result, submitted an expedited rule change (Item Filing B-1441) to address the question of payroll for employees who are being paid but are not working as it relates to the basis of premium. Upon approval, this rule change will be distinct from “idle time” under our current Basic Manual rules (Rule 2-F-1), and a corresponding code 0012 will be created for reporting these payments. These payments will not be used in the calculation of premium.
The details of the rule changes proposed in Item Filing B-1441 were submitted to state regulators in all NCCI states.https://www.ncci.com/Articles/Pages/Insights-Coronavirus-FAQs.aspx
Let’s start with the good news. Most states in the US have already approved a new classification code for payroll to be allocated for employees not working as a result of COVID-19 but still getting paid.
Disclaimer: This is an ever changing situation. Information is recorded as accurately as possible at the time posted. The information will continue to change and we’ll do our best to update accordingly. For the most accurate information check with your state rating bureau or commission.
Payroll during COVID-19 Code 0012 is approved in the following states as of May 4, 2020.
District of Columbia
Ohio Employers are not required to report to BWC the wages paid to employees who are idle at home because of the COVID-19 pandemic. Ohio is not using code 0012.
Pennsylvania – Just approved the exclusion of wages per circular released 5/5/2020. PA doesn’t use the same classification system, code 0012 is not applicable. PCRB CIRCULAR NO. 1740
To date (5/4/2020) the following states have not made an exception to the exclude wages paid for employees not working during COVID-19, or the exception just isn’t approved yet:
California – The WCIRB is working to determine the scope of any emergency regulatory changes to be proposed to the California Insurance Commissioner. We anticipate completing this time sensitive effort within the next few weeks. Approval is in the works in California- https://www.wcirb.com/content/wcirb-july-1-2020-special-regulatory-filing
North Carolina- Pending Approval
Even if you find yourself in one of the states on the second list, it’s highly recommended you record any payroll made to employees not actively working- OR ANY other payroll abnormalities due to COVID-19. There may be options available come policy audit and it’s easier to have the breakouts done prior to the audit than trying to go back and recreate the records.
Many of the states have legislation pending, even if it’s not found on the commission or bureau site at this time. Track it so if it is approved, you don’t pay WC premiums where you shouldn’t have to!
Insurance Coverage and COVID-19
We’ve added a video summary of the original post below. The date of the video below is 04/16/20
At the time of this writing (03/22/20), there are 30,347 infected and over 388 fatalities due to COVID-19 in the US alone. Businesses across the country are shuttering in the wake of unprecedented government-imposed restrictions and recommendations by the CDC, NIH and others for individuals to stay home in self quarantine.
Businesses are left wondering what options they have to stay afloat or at the very least replace some of the lost revenue. One of the first places companies turn to is their commercial insurance policies. The most common question we see is “Does my business income coverage apply to a shut down or income loss due to COVID-19?”.
To answer this question, we have to first take a closer look at business income coverage. For the purpose of this writing, I am referring to the most common policy forms nationally. Such forms are created by ISO (Insurance Services Offices, Inc.) and adopted by carriers and state insurance departments. Business income coverage triggers as a result of direct physical loss or damage from a covered cause of loss. What many policy holders may not realize is that business income coverage is a part of the commercial property policy (CP 00 99 04 or CP 00 10) are two examples. This means that coverage must be triggered or started by a covered direct physical loss on the property policy. While many property policies are written with an “All-Risks” property insurance coverage form, the All-Risks policy covers losses arising from any loss except those specifically excluded. The stance taken by many insurance carriers to date is that the presence of Coronavirus is not a direct physical loss or damage to property. Under this interpretation of the virus, coverage does not apply under business income, civil authority, or contingent business income. (CP 00 30 and CP 00 32) two common business income coverage forms. The most thorough coverage interpretation on the grounds of a denial I have found thus far is from Zelle, LLP, a firm representing Lloyds of London against a lawsuit defending their denial of Coronavirus claim from Oceana Grills. A link to the white paper can be found here. The publication by Zelle, LLP, also goes into detail regarding the coverage or lack of triggering events from Civil Authority and the limitations of contingent business income.
Another excellent read on coverage concerns relevant to claims being filed today is from Strook & Strook & Lavan, LLP, a team of transactional, regulatory, and litigation lawyers.
Read their article here.
To further exacerbate coverage concerns, there is an endorsement that is mandatory in many states where approved that specifically excludes coverage that is the “loss or damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness or disease.” (CP 01 40)
In response to the initial denials, the argument from policyholders and advocates on behalf of policyholders is contrary to the opinion expressed by Zelle, LLP that Coronavirus doesn’t cause direct property damage. Coronavirus lives on surfaces for days at a time and as a result the contamination itself would be a direct physical loss and thereby should trigger the business income coverage. Under this scenario, complications still arise for those policyholders with the endorsement (CP 01 40), exclusion for loss due to virus or bacteria.
While none of this seemingly gives comfort to business owners looking for answers it does give us the direction on what needs to be done next. Filing a claim for damages or loss. Unfortunately, discussions with your agent are likely to be unsatisfying as agents themselves don’t have the authority to make coverage determinations on behalf of the carriers. Your agent may tell you the unfortunate news that they have yet to see a carrier accept coverage or make a claim payment, but you shouldn’t let that discourage you from actually filing a claim. By filing a claim, you force the carrier’s hand to make the official determination of coverage. With a coverage denial the carrier has to give you the policy provisions they determine provide the exclusion or coverage limitation giving them the authority for the denial.
Your state insurance administration has likely published a bulletin or notice advising of current actions regarding to coverage under COVID-19.
One such notice is below by the Maryland Insurance Administration
Although it’s not the news you want, it is what you need on hand in the event things do change. How or why can things change? State insurance departments, state and federal officials, litigation, the courts, and others will all play a role in what happens in the weeks and months ahead. While coverage may not exist today by the carrier’s interpretation, those interpretations may not hold up or simply be overruled by regulators or legislators. Policy holders should be cautioned however that failure to file a claim in a timely fashion could further jeopardize coverage leading to additional complications in an already complex scenario.
Bottom line, file the claim now. If you’re looking for immediate premium relief, you may also want to consider reducing the payrolls on your workers’ compensation and ratable exposures on your liability policy (likely paryoll or sales). Many carriers have also adopted grace periods or are providing premium payment flexibility during the pandemic. Some have even suspended cancellation notices for non-payment of premiums. Reach out to your broker or carrier billing department to see what options may be available to you.
Jason Rilley is Vice President at The Jacobs Company, Inc. in Columbia, MD. Jason is a licensed Insurance broker for over 18 years and holds several professional designations, Commercial Lines Coverage Specialist (CLCS), Certified Professional Insurance Agent (CPIA), an Professional Workers’ Compensation Adviser (PWCA).
What if the employee was high at the time of the injury?
I had a client recently tell me that he’d heard if the employee was found to have drugs in his system, workers’ comp would deny the claim.
Like a lot of stories in the insurance world, this isn’t black and white, and will also vary by state.
In Maryland, Injuries caused solely by intoxication or the effects of drugs not prescribed by a physician are not compensable. Now, injuries caused where the primary cause is intoxication or
the effects of drugs entitle Claimants only to medical benefits, unless the controlled dangerous substance was prescribed by a physician and the use was not excessive or abusive.
Imagine the difficulty in proving the level of intoxication, as well as the burden to show the drug intoxication was the sole cause of negligence. It can and has been done, but is difficult to prove.
Md. Lab. & Empl. Code Ann. §§ 9-506(b), 9-506(c). and Md.Lab & Empl. Code Ann. § 9-506(d).
Uncovering Loss Cost Multipliers
I’d written previously about knowing your carriers LCM and why that’s important to you. If you don’t know what it is, start HERE.
If you’re ready for step two, I’m sharing links to the various states LCM’s. These aren’t always easy to find and some states deliberately don’t publish them. In some instances, the link will go directly to a list, others will involve another step or two to complete the search.
Start the clock… 3, 5, or 7 days before lost wage payments?
Check out this quick chart for answers on what the waiting period is in your state or province before lost wages kick in from workers’ compensation.
What is the retroactive period when an employee is able to recoup those first unpaid days?
How about who gets to direct care?
It varies by state. The answers are here!
Continue reading Start the clock… 3, 5, or 7 days before lost wage payments?
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Audits and your Liability Policy
A common topic of discussion is the workers’ comp audit. Either through the horror stories of friends or self experience, you’ve heard the terrible tale of the large comp audit. You’re now keenly tuned in to the payrolls and exposures on your work comp policy vowing never to let this happen to your organization again (or ever)!
Perhaps you’ve even transitioned to a “pay as you go” program to virtually eliminate the chance of an audit bill.
But… and there always seems to be a but. What about your liability policy? While you find yourself plugging the holes in one area, don’t forget the GL policy is often an auditable policy like the WC. Don’t make the mistake of assuming that since you’ve notified your carrier or broker of accurate payrolls for the workers’ compensation policy, those same updates translated to your liability policy! You might be surprised to learn otherwise and we already know, that’s rarely a good thing.
Keep track of your liability policy exposures just as you do on the WC!
Comp rates continue to fall in Maryland and Nationally!
OK, some good news likely headed your way! Many policy holders can expect some WC rate reduction again this year.
Here’s a notice just sent to Maryland brokers from Builders Mutual Insurance.
2018-01: Maryland Workers’ Compensation Rate Changes
Effective March 1, 2018 and applicable to all new and renewal Workers’ Compensation policies, Builders Mutual Insurance Company is implementing NCCI’s January 1, 2018 revised loss costs for Maryland and revising the Company developed Loss Cost Multipliers. This change represents an overall rate decrease of 9.4% to our Builders Mutual book of business and a decrease of 9.5% to our Builders Premier book of business, however changes may vary by individual class.
In addition, maximum and minimum payroll amounts are:
Included officers minimum payroll – $54,600 per year (was $49,400)
Included officers maximum payroll – $218,400 per year (was $197,600)
Sole proprietor or partner (if elected coverage) – $54,700 per year (was $48,900)