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Will Companion recoup their $370,000?
(no mention)
The employees DEATH occured at a SHIP YARD. Do any of you work comp specialists/consultants think that the USL&H PREMIUM SURCHARGE was being evaded?
Or just the standard low ball payroll figures, pay your guys 50% in cash deal?
But seriously, if anyone can elaborate in more deail as to what the components of the premium fraud were, that would be very educational for all in the work comp delivery/management business.
Thanks
Hmmm….agents/brokers understating payroll figures to get a lower WC premium…is this something new? Cynicism here. I’ve seen this for 32 years. Anybody surprised?
The auditor should have caught this at the end of the year premium audit if they knew what they were doing.
I believe this underscores the need for states to license and regulate consultants who provide services to reduce Workers Compensation premium charges. I’ve worked in that field since the early 1980′s, so I know that a good and ethical consultant can provide a valuable service. I also know that an unscrupulous consultant can do a lot of damage to the insurance system.
I have proposed model legislation in Illinois that would license and regulate such consultants, along the same lines as public claims adjusters, although that model legislation has not gotten much attention from the legislature so far. But is is a matter that should be seriously considered. At the moment, anyone can set up a website and claim to be an expert in reducing Workers Compensation premiums. And while most such consultants that I know of provide ethical and professional services, more must be done to weed out those who do not.
I am unaware of the experience of the convicted consultant or the specifics of this case.
Usually there are 2 separate policies from 2 different carriers with regards to USL&H policies. The USL&H exposure should have a certified payroll report submitted which is used to exclude that payroll from the normal w/c policy. The difficulty from an audit standpoint is if you only audit one of the policies and have no access to the other policy. You must accept the certified payroll report when auditing the normal w/c policy.
There are tips when reviewing these types of situations that can help. Look at the amount of income that is being generated versus the payroll reported on the USL&H. For example if the income is $2 million and the payroll reported is $250,000 and the insured is providing labor only on the USL&H job site. This would indicate payrolls being under reported or the use of subcontractors that are not being reported.
Years ago I audited a USL&H policy which had an employee working 116 hours a week for an entire quarter (3 months). When I questioned the accountant, he stated that they had a prevailing wage job where they were required to pay his $20 per hour and he was normally paid $10. The accountants solution to this problem was to double the hours worked in the payroll records for all employees. With this I disallowed all of the millions of dollars of overtime on the audit.
Underreporting payroll can usually be checked against the federal and state payroll tax reports versus voluntary payroll reports. In a two policy situation this doesn’t normally work.
Knowingly underreporting payroll on one or both policies is the most plausible scenario followed by the use of uninsured subcontractors.
Thank You, CG