If you are a contractor heavily involved in construction, you need to be aware of certain provisions available to you when it comes to insurance audits. We highly recommend that you engage with a knowledgeable insurance agent or risk management consultant who understands the rules and procedures with respect insurance audits.
Below are the Top 10 tips Rue Insurance sees with respect to insurance audits in NJ and PA.
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Clerical, Outside Sales, and Telecommuter wages are excluded from General Liability. Driver payroll can also be excluded from General Liability (GL) audits providing the employee exclusively performs driving duties. If a driver performs any other work besides driving, except under very specific circumstances, driver payroll is included in the governing class. Hired trucking (subcontracted drivers) moving your property for your operations are not counted as subcontractor exposure.
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Labor Interchange is allowed for construction classes for General Liability (GL) and Workers’ Compensation (WC) audits. If you have the appropriate records, you can split your construction payroll into different construction job classifications.
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For non-construction classifications for Workers’ Compensation audits, Labor Interchange is not permitted.
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Audits allow for deductions associated with Prevailing Wage work and Overtime and Officer Wage Caps. NJ and PA have separate rules that apply. Specific records must be maintained to show the overtime dollars per class. Deductions related to prevailing wage work only pertain to the fringe portion of the wage and based on how the fringe dollars are paid to the employee. Officer wage caps apply per state rules for Workers’ Compensation and per carrier for General Liability. With careful recordkeeping, and per carrier and state rules, deductions are available.
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Clerical Employees must perform clerical duties in an area that is a separate distinct area from the rest of the employees for the clerical classification. For example, if a clerical employee also helps with work inside a warehouse, the clerical classification will not apply. Inside Estimators fall to the Clerical Class. Outside Estimators fall to the Outside Sales Class. Labor interchange between clerical, outside sales, and the telecommuter class is not applicable.
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Executive Supervisor Class is reserved only for employees that travel to job sites and supervise the foremen who supervisor the laborers. If a person supervises laborers, they belong in the Governing Field Class. They will not be able to be classified as an Executive Supervisor. Also, Pennsylvania does not have a separate Executive Supervisor class. Executive Supervisors in Pennsylvania fall to the Outside Sales Class.
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The Outside Sales Class can apply to business owners traveling out of the office who attend bid meetings and meet with clients. It can also apply to Outside Estimators. But it is not used for business owners traveling to job sites managing or overseeing labor/work on a job.
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OCIP/CCIP wages can be deducted in full from audits providing insured’s give you the project and wage records for the OCIP/CCIP by classification and a certificate of insurance confirming OCIP/CCIP coverage applies.
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Certificates of insurance from subcontractors require evidence of GL and WC for the full audit period for your insured. Or, if the insured provides pay dates for their subcontractor(s) the certificates only need to cover the pay dates. If a subcontractor does not have WC and/ or GL, they will be charged to your governing field class or as an added class as an employee for the type of work the subcontractor performed on your behalf.
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Most audit errors have a 3 year look back period. If you find mistakes in your favor, you can use the look back period to ask for a return of premium.
Insurance audits can be time consuming. If you have an experienced insurance agent or risk management consultant working for you, who is familiar with audit rules and procedures, you will find the process easier. It often leads to the best outcome for your audit.
If you have more questions regarding insurance audits or your insurance needs, in general, please give Rue Insurance a call at 609-586-7474. And remember to …”Be Ready with Rue.”
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About the Author:
Sarah Dietz is a seasoned professional in the insurance industry with over 2 decades of experience. She is a licensed NJ insurance agent using both internal and external partnerships to achieve her client’s objectives. Sarah’s guiding principle has always been “Client First,” a mantra that she embodies in every aspect of her work. She has a reputation as a trusted advisor and advocate for her clients. Her strategic approach enables her to get the job done efficiently and effectively.
