Coordinated Occupational Accident Insurance, Contingent Liability Coverage, and Workers’ Compensation
Make no mistake: Occupational Accident Insurance (Occ Acc) is NOT Workers’ Compensation (WC). Unlike Workers’ Compensation, Occupational Accident Insurance can have optimal benefits or minimal benefits according to the needs of the Insured. Typically, the higher the benefits in an Occ Acc program, the greater the premium. Occ Acc is designed to be purchased by independent contractors; however, companies that insist on their independent contractors having this type of coverage should know that simply requiring Occ Acc coverage does not completely alleviate the risk associated with the company’s WC insurance carrier. If an Administrative Judge rules that a claim by an IC should be honored under the company’s own WC policy, or if the limits of the Contingent Liability Coverage are insufficient to cover the losses in a claim, then there is nothing to preclude the company’s WC insurance carrier from assessing WC premium on ALL of the company’s alleged independent contractors.
Many companies will mitigate this risk by purchasing a Contingent Liability Policy. This type of coverage kicks in when an independent contractor files a WC claim. Many times with advice of Counsel, the claimant is advised that Occ Acc has limited coverage while WC can be limitless. However, in order for the claimant to be granted WC benefits under the company’s policy, the claimant must be a proven employee. The Contingent Liability Policy will provide for legal defense in this situation. Additionally, if a judge rules that the claimant has been misclassified as an IC, the Contingent Liability Policy will cover the Workers’ Compensation benefits up to a certain limit. However, if the WC settlement amount were to exceed the limit, the company’s WC carrier would still be hit with the loss. In that scenario, the company’s WC carrier (who typically is not the same insurance carrier that issued the Occ Acc and Contingent Liability Policy) will then attempt to assess WC premiums on all of the ICs. This could be financially staggering.
That all said, those companies that require their ICs to have Occ Acc coverage and companies that have a Contingent Liability Policy should also have an Agreement with their WC insurance carrier to not assess premiums on the company’s ICs, whether or not the company is hit with a loss resulting from a claim filed by an IC. Some refer to this risk avoidance technique as having “the three legged stool”, thereby nearly eliminating all risk.
Mitigate or eliminate your RISK today by contacting Consultech. Call (800) 769-2994 or email [email protected] to contact us today.