Insurance Q & A – Answers from Marjorie Segale

Question 2 – Workers Comp
We have an insured who is a (domestic) employee referral agency. The employee is paid their wages out of a trust account set up by the homeowner using the domestic employee. The employment contract does not specifically require a Certificate of Insurance showing that the employee is covered for workers’ compensation. We are concerned that the referral agency could be considered the employer if the hiring party has no workers’ compensation coverage. We believe they should be asking for a Certificate of Insurance showing workers’ compensation coverage from the employing homeowner.

Answer by Marjorie L. Segale AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISR
Director of Education, Insurance Community Center
I think you are completely correct. Anytime an employee is hurt, the Department of Labor is going to look for any responsible party to pay for the medical treatment and/or lost wages. I think that they should rightfully ask for a Certificate of Insurance (I don’t think that the absence of that requirement in the contract is a big deal). It is very common for people to ask for a COI showing coverage even if there is not a specific obligation to do so in the contract.
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Insurance Q & A – Answers from Insurance Professional

Question 1 – Workers Comp
If an employer no longer has any employees is it necessary to maintain a WC policy if the amount of time they will be without employees is unknown? If so why?

Answer by Casey Roberts, ACSR, AFIS, CIC – Laurus Insurance Consulting
As you have probably figured out by now (even though you say you are a newbie) there are very few “yes” or “no” answers in the business of insurance. Let’s say the insured is a sole proprietor and no longer has any employees. In California I would not have a problem with canceling their Workers’ Compensation policy. Note that I would be 100% CERTAIN that they have no employees. Sometimes employers work with “independent contractors” who may or may not be considered as such should a claim occur. If this is the circumstance then I would be loathe to cancel their policy.

If the insured were a Corporation or similar ownership, I would want to make certain that ALL of the officers that have the ability to select to be covered or not to be have selected to NOT be covered. I would want this in writing from the individuals. Far be it from me to cancel a policy without the knowledge of one of those that could potentially be injured and have a claim.

Another consideration is that oftentimes insurers are willing for a minimum premium charge to continue to carry coverage just in case the insured suddenly and without telling you (trust me, this happens a fair amount of the time) hires a new employee. Consider that your insured just got a job and needs someone for two or three days…are they always going to remember to call you? Unfortunately the insurance agent or broker is not always the first person they think to call.