We wrote this article to help folks understand what their options are when they want to return to the New York State Insurance Fund, usually because the private marketplace won’t provide coverage due to class of business or poor loss history. This is very common as the private sector in the New York State Workers’ Compensation marketplace is thin at best. Thank our friends in Albany for that as the rates are too low for insurance companies to make money which drives the employers to the New York State Insurance Fund which is the carrier of last resort. I’m off my soap box now, back to the issue.
What transpires most of the time is that a company gets cancelled from their private insurance carrier due to losses or the carrier is no longer writing that class of business. An application gets made by the company or their broker as the file makes it way to underwriting. Here is where it gets interesting.
The underwriter does some basic research to see if either the company or its officers were ever underwritten previously with the NYSIF. Most carriers only search for prior organizations being written. State Fund underwriters run searches based on phone numbers, physical addresses, FEINs, and owners’ names as listed on the applications. Further, they ask in the underwriting process for tax returns, prior audits, and experience modification worksheets. Thus they have a veritable treasure trove of information. As a side note, it’s becoming increasingly difficult to hide information from insurance carriers as more and more info is publicly available and searchable. Evading a carrier’s underwriting processes is no longer a strategy for companies who have poor claims histories. Based upon the above underwriting requirements it’s difficult to not be caught if in a prior life you or your partners owed money to the New York State Insurance Fund.
Now what? If you suspect this may be true and you are getting cancelled, start the process early as it could take time to sort this out. Don’t wait as it could take months to get on the other side of this issue. Essentially it’s best to break your challenge into two separate issues.
- You need to bind coverage for continuity. Section 26-a says an employer is liable for a penalty of $2,000 per 10-day period of noncompliance, plus the actual award (including both compensation and medical costs), plus any other penalties the Board assesses for noncompliance. In cases involving severely injured employees, the medical costs alone could be in the hundreds of thousands of dollars per injury. This is your top priority.
- Second, you need to confirm the accuracy of what they are billing you for. This should be delegated to a specialist who can sort the wheat from the chafe. Quite often the amount being invoiced is incorrect, almost always in the NYSIF’s favor.
We suggest you quantify the problem first. Order a copy of the back up documentation the NYSIF fund is basing their prior audit invoices on. If it’s based on a past New York State Insurance Fund Workers Compensation Audit, order the worksheets they based their calculations on so you can controvert the audit. Further we suggest you hire a workers compensation premium recovery specialist to help you sort through all the rules and regs that apply to the workers compensation premium audits. Based on our experience, north of 63% of these audits are incorrect in favor of the NYSIF or private workers compensation insurance carriers.
Where They May Challenge You
We had a recent instance where a company was sold to some of the employees of the firm. The company owed the NYSIF money from over 10 years ago. The current owners stated they had no knowledge of the liability. Through the underwriting process, they picked up the names of the current officers of the company and did a search. They found that one of the officers of the company had a role in a prior audit from 10 years ago as he signed the audit papers. Even though he was technically only an “officer” and did NOT have an ownership interest in the company the NY State Insurance Fund took a hard position and stated that the officer did have direct control over the aspect of the company that related to the workers compensation audit as he signed for the audit and was a supervisor. Thus they ruled this particular company still owed the money to the NYSIF. This, like many rules, came about because folks who owed the NYSIF money were putting companies in their wives names then stating that they didn’t owe money from prior sins.
Where You May Challenge Them
It comes down to people, especially executive officers. The only instances where I have seen them make an exception is when there is absolutely no correlation in the people of the company whereby the company name is mistaken. Companies can win these if they dive into the owners and officers. If there is no executive officers in common between the company that owes the NYSIF money and the company being denied access it’s difficult to assert their denial.
If You Can’t Get it Overturned, but Still Need Coverage
There is a solution to the problem, if you get stuck between a rock and a hard place. Our Risk Advisors have the ability to get the amount you may owe financed over a period of time. Our finance company will pay the State Fund the money your company owes from a prior audit which then “unlocks” the eligibility of entry into the NY State Fund. The NYSIF will then quote your account and bind within several days.
Like most things in life, we must face our challenges and issues head on, as they simply don’t go away by throwing them into the circular file. The NYSIF plays a very critical role in the NY State Workers’ Compensation system as they will always write you a workers’ compensation policy irrespective of your loss history. The only caveat is you can’t owe them money from a previous life as their memory is so good they make elephants look absent-minded!
