<\/p>\n
I know, I\u2019m always the buzzkill in these articles I write, but it\u2019s only because I care. \u00a0I care about getting you covered and keeping you covered, hassle free.<\/p>\n
The first time I dealt with a client of mine who\u00a0was using day laborers, I didn\u2019t realize that his workers comp insurer\u00a0would have a problem. \u00a0I merely thought it was my duty to warn him that day laborers are considered\u00a0employees, and that whatever he paid out to his day laborers would be included in payroll\u00a0on his workers comp policy at the time of his final audit.<\/p>\n
After the conversation I felt good. \u00a0Why? \u00a0Because many employers don\u2019t consider day laborers to be actual employees and would be surprised to find that the workers comp auditor will include the amount paid to the day laborers as payroll and charge the employer for it. \u00a0Many employers think of day laborers as independent contractors, or maybe just temporary employees that don\u2019t need to be covered on workers comp. \u00a0But the fact is that they\u2019re not independent contractors; they\u2019re employees. \u00a0And any employee whether temporary, permanent, casual, or formal, is covered on the employer\u2019s workers comp policy, so any amount paid to them must be accounted for.<\/p>\n
So when my client left my office I felt good: I had eliminated an insurance surprise. \u00a0My client would not get stuck with a surprise invoice on his final audit.<\/p>\n
I was struck with an insurance surprise of my own, however, a few weeks later when I got a letter from my client\u2019s insurer stating that if my client\u00a0doesn\u2019t stop using day laborers, they would cancel the policy midterm. \u00a0That\u2019s right; midterm. \u00a0Non a non-renewal, but a midterm cancellation. \u00a0Talk about harsh. \u00a0I approached other companies. \u00a0\u201cWould you insure my client, an experienced\u00a0contractor with no claims on his record, that happens to sometimes use day laborers?,\u201d I asked. \u00a0The answer was a unanimous, \u201cNo.\u201d<\/p>\n
After a few intense\u00a0conversations with my client, he agreed to stop using day laborers and signed a form saying so. \u00a0His workers comp insurer agreed to continue insuring him.<\/p>\n
The recurring question my client had through\u00a0the ordeal was \u201cWhy.\u201d \u00a0Why is it a problem to use day laborers? \u00a0That was my question too. \u00a0Why does it matter? \u00a0 I mean, if the payroll is reported, the insurer is collecting its premium. \u00a0They\u2019re getting their money, and all should be\u00a0good. \u00a0Who cares if you use day laborers?<\/p>\n
Fortunately all the insurance companies were more than willing to explain why they don\u2019t want to insure employers that use day laborers\u2026. hahahahahahha!!! \u00a0That was a joke. \u00a0The truth is that insurance companies rarely\u00a0provide explanations for their actions. \u00a0They typically just write threatening letters and when questioned, repeat what they wrote on the letter. \u00a0It was no different this time.<\/p>\n
So in the short term, we have no choice but to\u00a0speculate. \u00a0Question: why would an insurance company refuse to insure an employer that uses day laborers? \u00a0The best place to start is with risk. \u00a0Day laborers must be high risk. \u00a0Risk equates to money. \u00a0Therefore, day laborers must cost insurers more money than other types of employees, which means day laborers must incur greater claims expenses\u00a0than other employees. \u00a0Because if day laborers were low risk and didn\u2019t result in many claims, insurers would happily collect the premium. \u00a0Sound reasonable so far? \u00a0But why would day laborers cost more?<\/p>\n
Again I can only speculate, but my guess is this: increased claims administrative costs and\/or potential for fraud. \u00a0Day laborers work for different employers on a daily basis. \u00a0Let\u2019s say a day\u00a0laborer has an aggravated wrist. \u00a0When did the injury occur? \u00a0Last Tuesday\u2026. or was it Wednesday? \u00a0Or could it be both Tuesday and Wednesday? \u00a0And if he was working for Employer A on Tuesday and Employer B on Wednesday, might he be able to file a claim with both Employer A and B\u2019s insurer? \u00a0And might there be considerable time spent between the two insurers figuring out who is the one that\u2019s supposed to pay? \u00a0And if the day laborer is\u00a0lucky (and has a good lawyer), might he be able to collect payment from both insurers? It certainly doesn\u2019t hurt to try. \u00a0 My guess is that a few too many insurance companies have been involved in a few too many squabbles over day laborers and paid a few too many dollars over dubious claims that they\u2019ve since decided they don\u2019t want to do it anymore.<\/p>\n
But that\u2019s just my theory. \u00a0The insurance companies will never tell me, not unless I happen to corner one of their representatives at a conference\u2026 or start working at\u00a0a Top 10 national brokerage (in which case, I think they answer every question you ask\u00a0AND give you more money). \u00a0Regardless, the moral of the story is this: don\u2019t use day laborers if you want to be insured by a competitively priced workers comp insurer. \u00a0If you must use day laborers, there\u2019s always State Fund!<\/p>\n
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You know those guys that hang around Home Depot […]<\/p>\n","protected":false},"author":3,"featured_media":3457,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,7,13],"tags":[],"class_list":["post-3480","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-insurance","category-liability-insurance","category-workers-compensation"],"_links":{"self":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/3480","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/comments?post=3480"}],"version-history":[{"count":1,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/3480\/revisions"}],"predecessor-version":[{"id":44638,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/3480\/revisions\/44638"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/media\/3457"}],"wp:attachment":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/media?parent=3480"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/categories?post=3480"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/tags?post=3480"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}