The Longshore and Harbor Workers’ Act was first passed in 1927, and has existed in its current form for 20 years, but recent developments have changed not only its applicability but also the availability of affordable insurance. Here are a few hot issues for the 2004 marketplace.
Recreational Marine Employment Act (RMEA). Opposition recently surfaced from unions against the Recreational Marine Employment Act introduced into the U.S. Congress originally in 2002, and again in 2003. The RMEA was intended to exclude many recreational marine employees from longshore. Hearings are scheduled in Washington in the near future.
Enforcement. It’s no surprise that enforcement has increased. The huge number of marine employees with no available benefits has drawn much attention, and federal, state and local governments are moving forward with increased enforcement of the Act.
Leasing. While there are many quality leasing companies or PEO’s that provide the right coverage at an affordable price, some leasing companies have been accepting marine employees without providing legitimate longshore coverage. In many cases, the “marine client/employer” is considered a joint employer and therefore is often held jointly responsible for the payment of any unpaid claims.
Maritime employers liability insurance (MEL). MEL is an excellent policy as it provides Jones Act as well as other admiralty coverages for many marine businesses. Also, it is essential if the client owns/operates vessels or if their employees work on vessels owned by others. But it is not longshore and yet is being offered by some as a low cost substitute for longshore insurance. To coin an old phrase, “if it looks too good to be true, than it probably is too good to be true.” Often such policies are placed with carriers that are not approved by the federal government to write longshore, an absolute in the Longshore Act. Regardless of where coverage is placed, MEL offers no longshore coverage whatsoever.
Misclassification. The classification system is complex for most businesses, but it is even more complex for many marine businesses as there are few established codes specific to the industry. Whether through misunderstanding, or deliberate action, misclassification is rampant and many states are now clamping down. Last year, an owner of a Florida-based company was ordered to pay more than $1million in restitution and sentenced to 10 years probation for deliberately misclassifying employees.
Classification changes. If there is one bright spot on the horizon, it is the potential for new marine classifications. Filings have been made with National Council of Compensation Insurance (NCCI) for eight new codes specifically for marine businesses. While this is a long and drawn out process, ultimately it could mean that marine businesses previously unclassified will be rated on the experience of their class, rather than some numbers related to other “dry” occupations. In my experience, most of these marine classes are dramatically overpriced and will, over the course of time, drop to find their true level.
Longshore markets. Over the last few years, the demise of Reliance, Legion and other longshore carriers, plus the withdrawal of other markets due to the lack of longshore reinsurance has hit the market hard. Add the reluctance of many insurers to write workers’ compensation in some of the top marine markets (most notably Florida and California), and you have arguably the tightest longshore market ever. There is little relief in sight and the market is expected to contract even further during 2004. Yet, there remain a handful of quality longshore insurers ready, willing and able to write the right business.
The magic solution. There is no one magic solution, however there are a sequence of steps that you can take that will give you the best results for the client. No one likes the paperwork involved, but the key to overcoming these problems is to “invest” time to fully understand the process and how you can obtain comprehensive coverage for your clients at the best cost.
• Make sure the business is properly classified.
• Consider payroll splitting; it can be a lot of paperwork, but if completed in accordance with NCCI rules, it can drastically decrease the bottom line workers’ comp/longshore costs.
• Make sure the experience modifier is accurate; check it yourself, or have someone else check it. One report suggests more than 40 percent of modifiers have errors.
• Make sure the client has drug-free and safety programs; not only will this save money in the short term with credits in many states, but will reduce costs in the long term, with lower claims.
• Sell your story. It is up to you to show why this operation is the best. No amount of pretty pictures, narratives and clean/clear loss runs will take a bad risk and make it good. But a poor presentation of a good risk can certainly have the opposite effect.
• And last, if you do not do this everyday, partner with professionals who understand the marine business, and are active daily in those fields.
Ian Greenway is president and CEO of LIG Marine Managers, based in Florida. He has worked extensively with the Longshore Act and is a nationally recognized speaker and trainer on the subject. Greenway is the author of Navigating Marine Workers’ Compensation and Navigating Marine Insurance. He can be reached at: IRG@LIGInsurance.com.
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