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Back to the Basics: Workers' Compensation


describe the imageSome of our clients needed some insurance help that unfortunately took precedence at the end of last week over blog posts.  We’ll be cranking them out fast and furious until Friday, and will get through all 13 that were promised.  Today we’re going to be digging into Workers’ Compensation.

What is it?

A number of years ago when I was in insurance school, our teacher taught us a rhyme to help us remember what workers’ comp is:  Workers comp is meant to be the sole and only remedy for work related injury.

Workers’ comp has been available in the United States since 1911 as a way to prevent employees from suing their employers for at work injuries.  Prior to workers’ comp, if the employee had any contributory negligence in their injury, regardless of whether it was due to faulty machinery or a dangerous location, the injury was then their problem.  Industrial and construction accidents were accepted as a fact of life, and workers’ comp was designed as no-fault insurance to pay for any at work injuries with the acceptance that the injured party could not sue their employer after receiving medical and wage benefits.  More history on workers’ comp systems around the world is available HERE.

Why should my construction company carry it?

Unless one of these bullet points applies to your company, you are legally required (at least in Connecticut) to carry this coverage.

In Connecticut, here are the types of employers and employees that aren't legally required to carry workers' comp:

  • Domestic employees working less than 26 hours weekly  – or officers of fraternal organizations paid less than $100 per year.  
  • A corporate officer is automatically included and must carry WC unless they elect to exclude themselves.
  • Sole Proprietors and partners are automatically excluded , but may elect to include themselves.
  • Single Member LLC are automatically excluded, but may elect to include themselves.
  • Multi Member LLC members are like Corporate officers – automatically included but can exclude.

If you’re a contractor with a wife and kids, here are some more reasons to buy it


Types of Claims:

Any injury sustained by an employee in the course of performing their job is considered a workers’ comp claim.  Whether it happens in the office, in the field, in the car, or at your desk, workers’ comp is your first dollar source for getting compensated for medical treatment and lost wages.

Loss Control Suggestions:

Make safety your construction company’s #1 goal. 

Provide safety training and personal protective equipment to each and every field employee.

Post-offer, pre-hire drug testing.  People that aren’t drunk or on drugs, statistically don’t injure themselves at work as much as people that are.

Safety committees.  Make one.  Meet quarterly at the very least.

Toolbox talks.  No matter how seasoned the employee, people can forget and become complacent.  Keep safety top of mind at all times.


One last thing to think about. Your experience modification factor drives your comp premium and your ability to bid jobs with certain general contractors and owners.  Keep it low, and keep your company competitive.

If you want to read some more on workers' comp, here are the other 20 or so blog posts that we have written about it

About the author:

Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues.  If you want to connect on twitter, he's at @fixyourrisk and here on Facebook

dan phelan litchfield insurance group


And because everybody enjoys funny safety pictures...

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comp4 resized 600comp5 resized 600

NCCI Predicts Rate Increase for Construction Industry


Read the full NCCI Report Here

Last month NCCI (National Council on Compensation Insurance) released a report that stated while claim frequency is down, indemnity (time out of work) and severity (cost of medical treatment) are both up.  This trend of claim frequency has been headed in a positive direction since 1991 due in large part to companies taking loss control and claim prevention seriously, as well as many factories and manufacturing plants adding increase automation in lieu of human workers for dangerous jobs.  There has also been a marked decrease in industries like construction and manufacturing since the "recession" began in 2008.  Less people working=less injuries.  However, the double-edged sword to this report are that the injuries that are still occurring have become more severe.  Due to the severity of some of these injuries, insurance carriers are still paying out substantial medical dollars and indemnity payments to out of work employees. 

What does this mean for Connecticut construction companies?  Simply, you can expect your workers compensation insurance premium to increase in 2011 through no real fault of your own.  Because of the losses from your peers in your industry, your MOD may decrease up a few points on 1/1/2011.  If you haven't heard from your agent what they've projected your MOD to be next year, now would be a good time to check.  Especially if you're a contractor that needs a sub 1.00 MOD to bid projects.  In situations like this, having an experience MOD under 1.00 is good, but not great because of its susceptibility to go over 1.00 when NCCI adjusts its rating formula.  Having MODs drop a few points can be helpful if you're hovering around 1.00, but the double edged sword to this is that with the rate increase, it could cancel out the potential premium decrease from your MOD dropping.

What would be great is if you had already partnered with an insurance broker that helps contractors develop strategies to achieve their minimum mod.  Not only will you not have to worry about bidding jobs, but you will also get to enjoy best in class pricing for your workers compensation insurance and have your account be looked upon favorably when it slides across the desk of an insurance company underwriter.  A couple of other bonuses for contractors that maintain a MOD below 1.00 is that they can apply for the Connecticut Contractor Credit on their workers comp insurance (less premium!) as well as receiving a credit for having a "credit MOD".  As a caveat, these credits aren't available from every insurance carrier (some carriers can provide cheap quotes without using credits because they don't actually understand how construction insuranace works).

So to sum it up:

Losses are down, but the cost per claim is up.

Because claim costs are up, NCCI is going to have to adjust their calculations.  Early predictions is a rise in MODS for all experience mod rated companies.

Talk to you agent about your mod.  Find out what they predict it will be in 2011.  If it's going to be around .97-1.00, try to put a plan in place ASAP to lower reserves and close claims.

Tomorrow in Hartford, there will be a public hearing explaining the change in NCCI's rating.  Details here

connecticut workers compensation insurance

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