Fact: Workers’ Compensation Insurance is a type of “property and casualty” business insurance required in all states, except Texas where an employer may opt out. It is referred to as a “line” of insurance coverage and is purchased from an insurance agent or broker. For an overview of state laws. http://reduceyourworkerscomp.com/workers-compensation-state-laws-and-regulations.php.Unpaid Premiums And The New York and the State Insurance Fund
It Really Is a Time Bomb!
BE AWARE before a new business is committed to start-up costs make inquiries to determine if the State Insurance Fund (SIF) has the name of any person who will be involved on a list before requesting coverage from SIF. Or, secure coverage with a private carrier.
A little noticed change in the Workers’ Compensation Law, Sect 93(c), as yet untested in court, is becoming hazardous to business start-ups. Prior to its enactment in July 1993, the State Insurance Fund had to issue policies at the request of a new business, even if officers of the company were associated in the past with other businesses with outstanding unpaid premium balances.
In 1993 the law was changed to permit the State Insurance Fund (SIF) to refuse to issue a policy if a single person having “control” in the new business had “control” in a prior business with an outstanding balance. The Fund uses computer searches and matches of all officers listed in businesses in New York to find matches of persons on its list of businesses with outstanding balances and refuses to issue a policy until someone pays the old balance.
The statute has many problems. The old balance might have occurred because of incorrect calculations by the Fund many years before. The Fund has no obligation to legally pursue the old debt and enter it as a judgment before tainting further business participations by persons with “control.” There is no definition of “control” in the statute.
A single person working as a supervisor for a single day can, years, later trigger the old debt and cause a “stop work” order to be issued.
The amount of the debt is irrelevant. Debts of less than $1,000 can be recalculated with added interest and penalties to become “debts” of tens of thousands of dollars. The ownership share of a single partner or officer is irrelevant. All that matters is that a name appear on a match.
The law applies only to State Insurance Fund policies. However, the Workers’ Compensation Board, which enforces failure to obtain coverage, has been rejecting employer defenses that SIF engaged in an error or violation of statute, claiming it cannot second-guess SIF decisions.
Most troubling is the impact this can have on the employees of a new business. Even if the employer acts quickly to secure coverage from a private carrier, gaps in coverage may have occurred. Worse, a “stop work” order, increasingly common, can cause employees to be suddenly without wages.
And who is behind all this? A computer. The computer finds the match and automatically begins to issue letters, demands and notifications. Once the automatic sequence is started there is no turning back and no arguing with the program. Eventually, humans can intervene but not until damage tens or hundreds of times greater than the underlying premium dispute is incurred.
How could such a law remain unnoticed for so long? It was not until the Board and SIF began a draconian program several years ago that the provisions became reality for thousand of small businesses. And for too long employers had been accustomed to a system that overlooked far worse transgressions obvious to all. (workersxzcompxzkit)
For employers: take inquiries from the WCB regarding lack of coverage seriously and respond quickly. The same applies to demands from SIF for unpaid premiums. The problems described above can be dealt with in a fraction of the time, at a fraction of the cost, if addressed immediately.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers’ compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100.
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