Certificates of Insurance Effect Workers Comp Claims

Learn about the effect insurance certificates have on work comp claims....

How a Certificate of Insurance Can Effect Workers Compensation Claims:

Just because your company may have received a certificate of insurance from someone else doesn't really mean you are protected from the liability of another employers worker being injured on your project or job site.

Think of an Insurance Certificate as an "insurance coverage snapshot in time." The Certificate of Insurance is a notice to the certificate holder that insurance coverage as stated on the certificate is in force basically on the day the certificate is produced. Even though there is a statement made on the insurance certificate that the insurance company will endeavor to let you know if the coverage is cancelled this process in practice is never followed. As a matter of fact most insurance companies do not even want the insurance agent who produced the certificate to send them copies. We'll talk more about this in other pages on our site and for now just concentrate on how a certificate can effect workers compensation claims.

The Certificate of Insurance and Workers Compensation Claims:

When you have secured a valid Certificate of Insurance from someone or some organization with whom you have a business relationship and that Certificate is placed in you files, in most situations, you have protected your business from being charged additional premium at audit. But avoiding the additional premium charge is only a part of the issue. If the workers compensation policy in force is cancelled for whatever reason and you are not aware of the cancellation then merely the fact of having a certificate will not help you by responding to a claim for compensation. Remember the certificate does not provide coverage only the active workers comp policy can provide coverage.



If you have hired another business to perform work for your organization and their workers comp policy is cancelled, you can expect your workers comp policy to step in and respond to any injury incurred by their employees. In other words, the injured worker, even if an employee of another business you have hired, can make a claim against your workers compensation policy when the policy they would have been covered under is cancelled and they are injured on your job.

Not only will your policy pay for the other businesses injured worker but you will incurr additional costs associated with the payment of this claim.

Here's a few of the additional workers comp costs you may incurr due to a claim:

Direct additional premium and possible addition of class code for injured worker picked up on audit due to claim. Negative effect the claim may have on your experience modification factor causing your emod to increase. The effect on your emod will be carried forward for three years.

So, as you see, not only will the claim effect your own workers compensation insurance carrier in the fact they will have to respond to a claim by someone who you do not consider your employee, but if experience rated, the claim will effect your insurance premium for three years to come!

Follow the link at the top of this page for our next topic about Insurance Certificates.

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