Who You Gonna Call? Preventing and Troubleshooting WC Compliance Issues. Overview of NYS Workers Compensation System for Insurance Professionals

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1 Who You Gonna Call? Preventing and Troubleshooting WC Compliance Issues. Overview of NYS Workers Compensation System for Insurance Professionals May 12, 2006

2 This booklet is intended to provide insurance professionals with general information regarding New York State s workers' compensation system. It includes information that is not within the purview of the Workers' Compensation Board in an effort to inform insurance professionals about these areas. This booklet does not represent legal advice and is not a complete description of the law. Only the Board, in its adjudicatory function, is authorized to determine entitlement to benefits based on the specific facts of a case and its application of the Law

3 What is Workers Compensation Insurance? Created in 1914 as the result of an historic agreement between employers and workers, the New York State Workers' Compensation Law ensures that in exchange for guaranteed medical coverage and compensation for lost earnings, employees would in most instances not be able to sue their employers in the event of an onthe-job injury. This no-fault system is designed to eliminate the uncertainty of litigation associated with the courts. This reduces the employer's exposure to costly lawsuits and provides benefits to all injured workers. Employers are required to obtain workers compensation insurance to cover all individuals considered employees under the NYS Workers Compensation Law. Currently, workers compensation benefits provide injured workers 2/3 their average weekly wage for periods when they are unable to work due to a work related accident or illness up to a maximum of $400 per week. In addition, workers compensation benefits cover all medical costs related to that work related accident/disease

4 The Players in the NYS Workers Compensation System Mission Statement of the Workers Compensation Board The mission of the Workers Compensation Board is to equitably and fairly administer the provisions of the New York State Workers Compensation Law, including Workers Compensation Benefits, Disability Benefits, Volunteer Firefighters Benefits, Volunteer Ambulance Workers Benefits & Volunteer Civil Defense Workers Benefits Law on behalf of our customers, New York s injured workers and their employers. To understand the workers compensation system, an employer or employee must first understand all the players that are responsible for the process. New York State Workers Compensation Board The first major player, the Workers Compensation Board, was established to administer the workers compensation law (WCL). It is responsible for the adjudication of claims and ensuring that employers provide the required coverage. The Workers Compensation Board administers the programs and laws of New York State in a fair and equitable fashion. The Board receives and processes claims and initially seeks to facilitate expedient agreements between injured workers and employers. When a consensus cannot be reached through administrative measures, it becomes necessary for the Board to conduct hearings before a Workers Compensation Law Judge. Evidence and testimony are gathered and analyzed prior to the rendering of a decision by the Judge. Decisions by Law Judges are binding. Parties may appeal the Judge s decision to the Appeals Unit. In such a case, a panel of three Board Commissioners will rule on the validity of the Judge s decision. Failing a unanimous decision by the panel, a full Board review by all thirteen Commissioners may be requested. The decision of the Full Board may be further appealed to the State Appellate Division, Third Department. The New York State WCL requires that most employers in New York State maintain workers compensation insurance coverage for their employees. That Law also gives the Workers Compensation Board the statutory authority to ensure that employers obtain and maintain the required workers compensation insurance. New York has a comprehensive strategy for ensuing that employers obtain and maintain the required workers compensation insurance. The strategy includes using a comprehensive database to identify employers and their insurance coverages, investigators, educational outreach, an automated penalty process, an appeal process, outside collection agencies, and the issuance of judgments. In addition to these internal functions, the Law provides for an external enforcement tool -- before any permit, license or contract is issued by any municipality or state agency to a business, proof of workers compensation must be provided by that business. New York State Insurance Department The second major player, the NYS Insurance Department, is directly responsible for authorizing the insurance carriers that are licensed to write NYS workers compensation insurance policies. The New York State Insurance Department is also responsible for administering the underwriting rules for workers compensation insurance in New York State. As part of this responsibility, the Department submits recommended revisions to workers compensation rates to the governor for approval each year. The Insurance Department has authorized another major player in the NYS workers compensation system, the New York Compensation Insurance Rating Board (CIRB) to initially develop the revised workers compensation insurance rates and to actually oversee the underwriting rules for workers compensation insurance policies

5 Compensation Insurance Rating Board (CIRB) The third major player in the system is the New York Compensation Insurance Rating Board (CIRB). CIRB is a non-profit, unincorporated association of insurance carriers, including the State Insurance Fund. In conjunction with the Workers Compensation Law, the Insurance Law provides for the Superintendent of Insurance to designate a statistical organization to collect the loss, premium and payroll data from each carrier, summarize this information and develop an adequate rate structure. Since the enactment of the Workers Compensation Law in 1914, CIRB has been licensed as the official organization for the collection of data and development of workers compensation rates. CIRB analyzes that data and recommends annual reductions or increases in premium rates to the State Insurance Department. Other important functions of CIRB include: To determine manual rates for each classification and experience modification rates for employers with premiums in excess of $5,000. To establish the rules and procedures, classifications and rates governing the underwriting of workers compensation insurance and employer liability insurance. Insurers Insurers are the last major player in the workers compensation system and are comprised of insurance carriers, self-insured employers and employers that are participating in group self-insurance. Insurance Carriers collect premiums from employers to pay for the claims and related medical expenses of employees who are injured on the job. Over 200 private insurance carriers are authorized by the NYS Insurance Department to provide workers compensation insurance to employers and currently write such insurance. In addition, because of the compulsory nature of the workers compensation law, the Legislature created the State Insurance Fund to provide insurance to those employers who cannot obtain it from a private insurance carrier. The State Insurance Fund is an independent, quasi-public agency that provides workers compensation insurance to over one-third of the eligible employers in New York State. The purpose of the Fund is to provide insurance to any employer in the state, without regard to experience or size. Self-Insurers -- Self insured employers pay for all medical care and indemnity benefits out of pocket, rather than through an insurance carrier. The resulting costs can be less than traditional insurance, if an employer predicts future costs and exercises extensive loss control programs. The employer s costs are more directly related to their own loss experience, and do not include the losses and liabilities of other employers. Only very large corporations have the financial ability to become self-insured. An employer qualifies as a selfinsurer by furnishing to the Chairman of the Workers Compensation Board satisfactory proof of its financial ability to pay compensation. The employer must deposit with the Chair securities of certain classifications specified in the Law, irrevocable letters of credit, and/or a surety bond in an amount determined by the Board. A political subdivision that does not purchase a workers compensation insurance policy is deemed to be a self-insurer, but is not required to give proof of financial ability or make a deposit of securities or file a surety bond. Group self-insurance allows employers engaged in similar activities in a given industry to pool their assets (and losses), and thereby spread the costs among a group of employers. This allows employers who are not large enough to self-insure an opportunity to obtain the benefits of self-insurance. Group self-insurers are also required to maintain a security deposit, which may consist of one of the following: cash, securities, irrevocable letters of credit or a surety bond. The workers compensation law provides that each participant is responsible for their own claims if the group dissolves or otherwise fails to meet its obligations. Participants in a group self-insurance pool must execute indemnity agreements, holding themselves jointly and severally liable for each other. Contact your trade association for more information on group selfinsurance

6 Comprehensive Strategy for Enforcing New York State s Mandatory Workers Compensation Coverage Requirements & No Insurance Contingency May 12,

7 Overview of New York State s Comprehensive Workers Compensation Coverage Enforcement Strategy and No Insurance Contingency The New York State Workers Compensation Law (WCL) requires that most employers in New York State maintain workers compensation insurance coverage for their employees. That Law also gives the Workers Compensation Board the statutory authority to ensure that employers obtain and maintain the required workers compensation insurance. This document will attempt to outline New York s comprehensive strategy for ensuing that employers obtain and maintain the required workers compensation insurance. The strategy includes using a comprehensive database to identify employers and their insurance coverages, investigators, educational outreach, an automated penalty process, an appeal process, outside collection agencies, and the issuance of judgments. In addition to these internal functions, an external enforcement tool is that before any permit, license or contract is issued by any municipality or state agency to a business, proof of workers compensation must be provided by that business. The last part of the document will describe the no insurance process and the Uninsured Employers Fund. This comprehensive enforcement strategy is anchored in the NYS Workers Compensation Law. To access sections of the NYS WCL on the Web, please follow the following directions: Click on Bills/Laws Click on Laws of NY (5th bullet) Click on WKC (Last one under Consolidated Laws) Find the section that you are looking for and click on it. The following are key sections of the NYS WCL that pertain to insurance compliance and also sections that pertain to NYS s Uninsured Employers Fund. Sections 2 and 3 of the WCL define employees and employers. Section 50 defines the types of acceptable workers compensation coverage. Section 51 requires posting notices. Section 52 defines liability for being uninsured. Section 54 defines the insurance contract. Section 56 defines liability of contractors for uninsured subcontractors Section 57 requires enforcement by other government entities (prior to issuing permits, licenses or contracts). Section 110 requires employers to notify the Board in case of accident. Section 124 authorizes the Chair to prescribe the information that should be reported to administer the Law. Section 131 requires employers to maintain accurate payroll records and have them available for inspection Section 136 establishes the Workers Compensation Fraud Inspector General Sections 26 and 26-a establish the Uninsured Employers Fund. While the Law provides an excellent basic structure and the basic tools, it s the implementation of the Law that ensures compliance. 7

8 New York State s Comprehensive Workers Compensation Coverage Enforcement Strategy Database of businesses/compliance status The Insurance Coverage Unit of the Bureau of Compliance monitors the coverage status of all subject employers in the State (a number that exceeds 700,000). This Unit ensures that: 1) Employers maintain required insurance coverage so that their employees can receive timely statutory benefits under the workers compensation and disability benefits laws; and 2) A level playing field exists insofar that all employers in similar industries are subject to similar costs of doing business regarding these statutorily required insurances. To keep track of all of those businesses, the Insurance Coverage Unit uses an automated computer database system. The database gathers information on businesses from a number of sources including: the NYS Department of State (corporations, LLCs, LLPs, and LPs), the NYS Department of Labor (Unemployment Insurance records), insurance carrier records, Bureau of Compliance investigations and claims information. Once an employer is established, an employer s database records are updated by workers compensation coverage information sent to the Board from insurance carriers and approved self-insurers. (The Board has instituted a program that requires insurers and selfinsurers to send this information to the Board electronically.) Employers in New York State are required to maintain continuous workers compensation coverage. Accordingly, based upon the information contained in the database, the Bureau of Compliance sends computer generated noncompliance and penalty notices to subject employers found in noncompliance. The Insurance Coverage Unit answers inquiries to clarify coverage issues, reviews correspondence, enters data updating coverage records and "suspends" penalties that may be eligible for appeal. The Insurance Coverage Unit may be reached at A Data Administration Unit ensures that the database reflects accurate employer and coverage information. It supports carriers in their submission of electronic proof of coverage filings. Penalty Process for Noncompliance In most cases, if the WCB does not have coverage information for an employer for a specific period in time, the Board will send out an inquiry notice to a business requiring the business to identify how it is complying with the mandatory coverage provisions of the WCL. If the employer does not provide appropriate coverage information within a certain time frame, the employer is penalized at a rate of $250 for each 10 days of noncompliance (statutory penalty). If the business has not either paid or appealed the penalty within approximately 3 months, the Board sends the penalty to collection agencies. If the collection agencies are not successful in collecting the penalty, then the Board is able to issue a judgment against the business for the delinquent penalty amounts. All monies collected are deposited into the Uninsured Employer s Fund, the special fund used to pay no insurance claims. Once the Bureau levies a penalty, if filed timely, the employer has the right to appeal the penalty by requesting a "Redetermination Review" of the facts surrounding the penalty. The Penalty Review Unit (PRU) processes the appeal of penalties based on information provided by the business. PRU actions may result in penalties being rescinded, reduced or upheld. 8

9 The Penalty Collection Unit (PCU) is primarily responsible for administering collection of fines imposed for non-compliance with Workers Compensation Law and recouping the costs of claims (plus assessments) paid on behalf of uninsured employers by the Uninsured Employers Fund. For penalties that are currently in the hands of the Board s collection agencies, the PCU is the Board s point of contact for questions and concerns about dealing with the agencies. The PCU will also receive and review documentation concerning any partial or complete rescission of penalties while at the collection agencies. Finally, the PCU administers all payment plans allowing employers to payoff fines and claims over time. The Judgment Unit is responsible for processing two types of workers' compensation penalties that are deposited into the Uninsured Employer s Fund (those related to Sections 52.5 and 26-A). While the judgments are computer generated, the staff from the Judgment Unit is responsible for fielding questions related to the judgments and issuing satisfactions or rescinding the related penalties. Investigative Staff The Enforcement Unit serves as the investigatory arm of the Board conducting both claims and employer coverage investigations. This staff is sent on-site to determine employer coverage requirements and, if appropriate, to encourage the business to get into compliance. Educational Outreach The Bureau of Compliance conducts ad hoc training to various groups on compliance requirements of the Workers Compensation Law. Such groups include business associations, accountants, insurance professionals, government economic development entities and building department associations. The Bureau also conducts site training to large municipalities and State agencies to advise them of their requirements under Section 57 of the Workers Compensation Law. As part of this initiative, the Bureau conducts training seminars through the auspices of the NYS Department of State Codes Division throughout New York State for Building Department Code Enforcement Officers on these sections of the Workers Compensation Law. Enforcement by Other Government Entities Section 57 of the Workers Compensation Law (WCL) requires the heads of all municipal and State entities to ensure that businesses applying for permits, licenses or contracts have appropriate workers compensation insurance coverage. It is interesting to note that these Sections of the Law are not new. In fact, Section 57 was originally enacted by the Legislature and signed by the Governor in 1922! Ensuring that businesses, receiving permits, licenses or contracts from municipal and State agencies, comply with the Workers Compensation Law protects both injured workers and employers. In addition, such oversight helps to level the playing field, by requiring all businesses to maintain the required insurance coverage. Municipal and State agency cooperation in enforcing Sections 57 of the WCL is a critical component of encouraging business compliance. 9

10 Fraud Inspector General Workers Compensation Fraud is now a Class E Felony, punishable with up to four years imprisonment, $5,000 individual/$10,000 corporate fine, and five years probation. The Board is actively pursuing cases of employer and employee fraud. People who inflate or misrepresent a claim or submit a false claim are committing fraud. People who get hurt participating in a leisure activity on Sunday and report it on Monday as a work-related accident are committing fraud. Employers who misclassify their employees or payroll are committing fraud. Health care providers who submit false medical reports or inflated bills are committing fraud. Attorneys who solicit a person to file a false claim, or insurance carriers who alter evidence to support a denial of benefits are committing fraud. Fraud hurts everyone. 10

11 Liabilities and Penalties for Not Having Required Workers Compensation Insurance Coverage Failure of an employer to provide workers compensation coverage as required by law will subject the employer to penalties and the cost of claims incurred. It is solely within the authority of the Board to determine when coverage is required. Sole proprietors, partners of a partnership, and the President, Secretary and Treasurer of a corporation, are personally liable for a firm s failure to secure workers compensation insurance. Liabilities and penalties for not having the required workers compensation coverage include, but are not limited to: Liability for Claims Incurred by an Uninsured Employer for Workers Compensation Insurance -- Section 26-a of the Workers Compensation Law The employer is liable for paying an assessment of $250 for each claim incurred while uninsured plus 15% of the amount awarded (minimum of $1,500--maximum of $5,000) plus the actual award (including both compensation and medical costs) plus any penalties the Board assesses for noncompliance. Penalties for Noncompliance with Workers Compensation Mandatory Coverage Requirements 1) Section 52-5 of the Workers Compensation Law -- The Board may impose upon an employer, in addition to all other penalties, a fine of $250 for each 10-day period of noncompliance or two percent of the employer s payroll during the period of noncompliance (whichever is greater). The fine of $250 for each 10- day period of noncompliance is the most commonly imposed penalty for noncompliance. 2) Section 52-1 of the Workers Compensation Law -- Not securing required workers compensation insurance is a misdemeanor -- punishable by a fine of not less than $500 nor more than $2,500 or imprisonment for up to one year. A second violation of the Law within five years may result in a fine of not less than $1,000 nor more than $5,000. A third or subsequent violation of the Law within five years may result in a fine of up to $7,500. The Board enforces these penalties against employers for blatant cases of abuse and levies them in addition to penalties contained in paragraph 1, and liabilities and penalties incurred for claims incurred while uninsured. 3) Section 51 of the WCL -- Any employer who fails to conspicuously post a C-105 form in each place of business that indicates their workers compensation insurance coverage shall be required to pay to the board a fine of up to $250 for each violation, in addition to any other penalties imposed by law to be deposited into the uninsured employers' fund. Additional Liability for Uninsured Employers 1) An uninsured employer is responsible for obtaining and paying for any legal representation required to defend against a workers compensation claim. (An insured employer s workers compensation insurance carrier provides such representation as part of the workers compensation insurance policy s coverage.) 2) An uninsured employer can be directly sued by an injured employee. (In most cases, an employer s workers compensation insurance is the sole recourse for the employer s injured employees.) 11

12 New York State s No Insurance Contingency NYS has established a safety net for injured workers whose employers have failed to provide the required workers compensation insurance coverage. The New York State Workers Compensation Board s No Insurance Unit provides the claims processing for no insurance cases and the Uninsured Employers Fund (UEF), defends the Fund before the NYS Workers Compensation Law Judges and once a claim is deemed a proper no insurance claim, actually provides for the payment of such claims. The No Insurance Unit provides for payment of compensation benefits and medical treatment out of the Uninsured Employers Fund when the uninsured employer defaults in his obligation to pay the award. Uninsured Employers Fund Unit The Uninsured Employers Fund (UEF) established under Section 26-a. of the Law was created to provide for the payment of awards made against uninsured employers who have defaulted in their obligation to provide payment of benefits within statutory requirements. The UEF is funded primarily through the collection of penalties for noncompliance with the mandatory coverage provisions of the WCL and from payments from the actual employers with no-insurance claims. Additional funding, if required, comes from a general assessment against all workers compensation insurance carriers. The UEF Unit provides legal representation at No-Insurance hearings in defense of the Fund s assets. Summary This document provided an outline as to the comprehensive strategy used by New York State to enforce the mandatory coverage requirements of its Workers Compensation Law. It also provides a brief overview of the process it uses to address instances where, despite the State s coverage enforcement efforts, workers, whose employers have failed to provide the required workers compensation insurance coverage, are injured. Please feel free to contact Steve Carbone at if you have any additional questions or require any additional information. 12

13 GUIDELINES FOR FILING LEGAL NAMES FOR EMPLOYERS May 12, 2006 A. CORPORATIONS -- Employer names must be followed by Corp. (Corporation), Inc. (Incorporated), PC (Professional Corporation), HDFC (Housing Development Finance Corporation) or Ltd. (Limited). B. PARTNERSHIPS -- Indicate the names of at least two partners. If there are MORE than two partners, the names of AT LEAST two of the partners must be indicated, followed by ET AL indicating and others. If appropriate (and if space allows), enter the partners names; followed by either DBA (Doing Business As), AKA (Also Known As) or TA (Trading As); and then followed by the business name. Note 1: Some documents may indicate a "JV" (Joint Venture) which is another form of a partnership. Please list the names of the businesses involved followed by "JV" (Joint Venture). Note 2: Some documents may indicate a LP (Limited Partnership), LLP (Limited Liability Partnership), a RLLP (Registered Limited Liability Partnership), a LLC (Limited Liability Company), or a PLLC (Professional Limited Liability Company) after the employer's name. Employer names followed by these letters are complete legal business names. Therefore, do not indicate the names of the members of these legal entities. C. PERSON -- Indicate the name of the individual. If appropriate (and if space allows), enter the name; followed by either DBA (Doing Business As) or TA (Trading As); and then followed by the business name. Please note: Do not include Inc. in the DBA or TA name. D. ASSOCIATION -- Clearly indicated Associations are acceptable legal entities. However, "Associates" is not a legal entity. Therefore, to avoid confusion and avoid the possible invalidation of POC information, please DO NOT abbreviate Association to Assoc. since it may not be an acceptable legal entity. E. GOVERNMENT ENTITIES -- List the name of the political subdivision of the State, municipal corporation or fire district that is being insured. F. NOT-FOR PROFIT ENTITIES -- Not-for-profit entities, such as churches, schools, charitable and fraternal organizations, etc. are reported in a variety of ways. If an entity is incorporated or is an association, please indicate this using the instructions referenced above. For other not-for-profits, to avoid confusion and ensure the name s acceptability, it is preferred that the name of the not-for-profit be followed by NFP (not-for-profit). PLEASE NOTE: Individual churches or schools that are covered under a diocese DO NOT require individual filings unless they are separate legal entities with separate FEIN numbers. 13

14 G. TRUSTEE OR RECEIVER -- May be indicated for any form of legal entity. l. These records are kept separate from the initial employer record and must have an assigned FEIN. 2. Please list the name of the trustee or receiver for the employer. 3. Then list Trustee for (name of employer) or Receiver for (name of employer). 4. If the document does not clearly indicate whom the trustee or receiver is, it will be deemed "INVALID NOT A LEGAL ENTITY" and returned to the carrier for proper submission. H. LEGAL REPRESENTATIVE -- May be appointed to handle the affairs of a deceased employer. l. These records are kept separate from the initial employer record and must have an assigned FEIN. 2. The legal representative does not have to be an attorney or a law firm. It may be an individual serving as the executor or executrix of an estate. 3. If the workers compensation insurance is for an estate, please list any individual designated as the executor or executrix and then the term executor or executrix followed by Estate of.... J. UNIONS -- Please note the local number of the union followed by its appropriate trade designation. PLEASE NOTE: Proof of Coverage (POC) is required for each legal entity listed on the policy. To ensure accurate reporting to the Board, each separate legal entity should have its own unique Federal Employer Identification Number (FEIN) or Social Security Number (SSN). 14

15 Electronic Filing of Workers Compensation Insurance Proof of Coverage The NY State Workers Compensation Board adopted the IAIABC (International Association of Industrial Accident Boards and Commissions) Standard for POC effective 12/1/2001. The IAIABC EDI standard supports the electronic exchange of policy and coverage data. WCPOLS data is converted to the IAIABC standard for submission to jurisdictions. Currently, there are 16 states that have implemented this standard in the United States. Carriers submit this data either directly to the WCB or by using the services of an approved vendor. The data is acknowledged back to the carrier in an electronic format informing them of the success or failure of their transaction submissions. In December of 2003 the Board made the reporting of an employer Federal Tax Identification Number, FEIN or SSN mandatory for reporting POC, Proof of Coverage. These Tax Identification Numbers are used to match Proof of Coverage submissions to an employer record. Requirements: FEIN/ SSN as per Subject Number September 25, 2003 This notice is also available from our website. Board Releases (Subject Numbers) New York Codes Rules and Regulations, Title 12. Department of Labor, Part 300. Procedures Before the Board, Section Contracts of Insurance o Defines the requirements to insurance carriers regarding proof of coverage, i.e., Notification of the issuance, amendment, endorsement, rider or reinstatement of any workers compensation insurance contract. o Defines the manner and timeframe of the requirement, i.e., file notice with the chairman in a manner prescribed by the chairman within 30 days after such action by the insurance carrier. 15

16 Tips to ensure clients coverage gets posted accurately at the WCB -- FEIN numbers make sure they re fine! Does the application for insurance collect the FEIN? Is there a designated space to enter the information? Do your agencies business processes and, or procedure support the collection and verification of the required information? This will improve the success of the carrier in submitting correct information to the Board. Does the applicant (insured) conduct business under multiple business entities, not just locations or trade style names? Are you collecting a TIN (Tax Identification Number) for each entity? Do the subsidiary legal entities use a common paymaster? Does each legal entity using the employees of a common paymaster have a workers compensation policy in its own legal name and FEIN? Does the applicant have more than one Dept. of Labor account? Each active UIER (Unemployment Insurance Employer Registration) account should have a unique FEIN. The DOL does not collect SSN; they require employers to obtain a FEIN. The Board will accept the SSN of a sole- proprietor however, if they report to the Dept of Labor with an FEIN the FEIN should be collected and reported to the carrier. Would additional documentation from the employer confirm the accuracy of the information provided on the insurance application? SS-4 issued by IRS with FEIN NYS 45,Quarterly Combined Withholding, Wage Reporting and Unemployment Insurance Return Resource: Understanding your EIN, IRS Publication 1635(Revised 7/2004) 16

17 How uninsured gaps occur / how to clear them up Reporting errors: o POC filing was not submitted o POC filing contains the wrong information; the FEIN on file with the Board does not match what was collected by the agent and submitted by the carrier. Tip: if you have a notice from the Bureau of Compliance compare it to the employers policy; do the entity name and FEIN match the policy record? o Corrections were only reported for a single policy term. Does more than one term need to be addressed to correct compliance period. o Amendments or endorsements not reported to carrier within 30 days, carrier is delayed in reporting to jurisdiction. o Change, transfer or assignment of interest, ex. Sole- proprietor to LLC. Are changes to policy amending the coverage to include the new entity name during the policy term? o The employer has multiple legal entities, each with their own FEIN, having employees. The FEIN for each distinct entity was not reported with the o policy. Multiple legal entities (endorsed on the policy) were all submitted using one FEIN. Each legal entity must have a record( employer/ location/ endorsement) submitted under its unique FEIN. Insurance agents play an important role in collecting and reporting accurate and timely information on behalf of their clients to insurance carriers. By gathering and submitting correct info from your clients, you can have a tremendous impact and greatly improve compliance processes! 17

18 Out-of-State Companies Working in NYS -- NYS Workers Compensation and Disability Benefits Coverage Requirements NYS Workers Compensation Coverage Requirements Generally, employers must have a workers compensation policy or a combination of policies that cover each state in which they employ individuals to cover on-the-job accidents and disabilities. As you are probably aware, certain insurance carriers write policies that cover multiple states. "Riders" found under sections "3A" and "3C" on the Information Page of the policy specify the states of coverage. The operations covered in each state are identified in attachments to the policy. In addition to any other state s workers compensation coverages, an out-of-state employer needs to be specifically covered for NYS workers compensation insurance when there are "sufficient contacts" between that employer and the state. While there is no single determinative factor, any of the following criteria could be the basis for finding "sufficient contacts" requiring New York coverage: a physical location within New York State; $50,000 in payroll during a calendar year in New York State; one or more employees with a primary work location or hired within New York State; or employees working in New York State for more than 90 days during a calendar year. If an out-of-state employer meets any of the above criteria, it is required to carry a New York State workers compensation policy. When New York is listed in Item 3A on the Information Page of an employer s workers compensation insurance policy, the employer is fully covered under the NYS Workers Compensation Law. If an employer working in New York does not meet any of the above criteria, the employer s employees will be covered when working in New York by having "NY" listed in Item 3C on the Information Page of the workers compensation insurance policy (the all-states section). Out-of-state employers, including out-of-state employers from monopolistic WC states that are working in NYS (employers from Ohio, North Dakota, Washington, West Virginia & Wyoming) and foreign countries (IE. Canada), who can not obtain 3C coverage on their home state's or country s WC policies will NOT be penalized by the WCB for noncompliance as long as their home state's or country s WC policy is in force and as long as they do not meet any of the above criteria for specific New York State workers compensation insurance. However, such out-of-state employers will be liable to pay any workers compensation claims that are found to be compensable under the NYS Workers Compensation Law. NYS Disability Benefits Coverage Requirements An out-of-state employer needs a New York State disability benefits insurance policy if the employer employs one or more individuals on each of at least 30 days in a calendar year in New York State. If an out-of-state employer meets this criterion, the employer is required to carry a New York State disability benefits policy. (The employer has four weeks from the completion of the 30th day of work by one or more individuals to obtain the disability benefits policy.) If an out-of-state employer does not employ one or more individuals on each of at least 30 days in a calendar year in New York State, NYS disability benefits coverage is not required. (Independent contractors are not considered to be employees under the Disability Benefits Law.) It may be appropriate to check the yellow pages, contact your insurance broker, carrier or agent, check with your trade association, or conduct additional research to find the most appropriate insurance coverage for your company. In addition, a NYS workers' compensation and/or disability benefits insurance policy may be obtained from the NYS Insurance Fund by calling Please note that this letter is for informational purposes. Only the Board, in its adjudicatory function, is authorized to determine entitlement to benefits based on the specific facts of a case and its application of the Law. 18

19 Who To Call When Clients Have Problems General Workers Compensation Insurance Coverage Inquiries NYS Workers Compensation Board (WCB) -- Insurance Coverage Unit The Insurance Coverage Unit of the Bureau of Compliance monitors the coverage status of all subject employers in the State (a number that exceeds 700,000). This Unit ensures that: 1) Employers maintain required insurance coverages so that their employees can receive timely statutory benefits under the workers compensation and disability benefits laws; and 2) A level playing field exists insofar that all employers in similar industries are subject to similar costs of doing business regarding these statutorily required insurances. To keep track of all of those businesses, the Insurance Coverage Unit uses an automated computer database system. The database gathers information on businesses from a number of sources including: the NYS Department of State (corporations, LLCs, LLPs, and LPs), the NYS Department of Labor (Unemployment Insurance records), insurance carrier records, Bureau of Compliance investigations and claims information. Once an employer is established, an employer s database records are updated by workers compensation coverage information sent to the Board from insurance carriers and approved self-insurers. A special Telephone Unit within the Insurance Coverage Unit answers inquiries to clarify coverage issues, reviews correspondence, enters data updating coverage records and "suspends" penalties that may be eligible for appeal. Workers Compensation Proof of Coverage (POC) Inquiries The Board has instituted a program that requires insurers and self-insurers to send workers compensation proof of coverage (POC) information to the Board electronically using the unique Federal Employer Identification Number (FEIN) of each employer. Employers in New York State are required to maintain continuous workers compensation coverage. Accordingly, based upon the information contained in the database, the Bureau of Compliance sends computer generated noncompliance and penalty notices to subject employers found in noncompliance. The Bureau should be notified if an employer had coverage under the correct legal name and FEIN of that employer, but the carrier refuses to supply POC to correct the noncompliance notices for periods where the insured was covered. Penalty Process for Noncompliance NYS Workers Compensation Board -- Penalty Review Unit, Penalty Collections Unit & Judgment Unit In most cases, if the WCB does not have coverage information for an employer for a specific period in time, the Board will send out an inquiry notice to a business requiring the business to identify how it is complying with the mandatory coverage provisions of the WCL. If the employer does not provide appropriate coverage information within a certain time frame, the employer is penalized at a rate of $250 for each 10 days of noncompliance (statutory penalty). A Penalty Collections Unit monitors penalty monies received and applies them to the correct business. If the business has not either paid or appealed the penalty within 3 months, the 19

20 Board sends the penalty to collection agencies. If the collection agencies are not successful in collecting the penalty, then the Board is able to issue a judgment against the business for the delinquent penalty amounts. All monies collected are deposited into the Uninsured Employer s Fund, the special fund used to pay no insurance claims. Once the Bureau levies a penalty, the employer has the right to appeal the penalty by requesting a "Redetermination" of the facts surrounding the penalty. The Penalty Review Unit processes these redeterminations which may result in penalties being rescinded, reduced or upheld. The Legal Judgment Unit is responsible for processing two types of workers' compensation penalties that are deposited into the Uninsured Employer s Fund (those related to Sections 52.5 and 26-A). While the judgments are computer generated, the staff from the Legal Judgment Unit is responsible for fielding questions related to the judgments and issuing satisfactions or rescinding the related penalties. Advocate for Business for the Workers Compensation System The Advocate for Business Office is the primary interface between New York's business community and the Workers' Compensation Board. The office was created by legislation as a response to businesses' request to have one place they can call to get answers to their workers' compensation questions and help with understanding the workers' compensation system. The major functions of the Advocate for Business Office are: To assist individual businesses with problems they may have with their coverage, understanding their experience modification and classifications, and with complying with the Workers' Compensation Law; To educate business owners, insurers, and government personnel on the way the workers' compensation system works and the role that each participant in the system plays; and To meet with business associations and groups to listen to the concerns they have regarding workers' compensation and report to Chair of the Workers Compensation Board those concerns and offer possible solutions to address the issues. The Advocate works closely with the Governor's staff, the Legislature, insurance carriers, the New York Compensation Insurance Rating Board and the Governor's Office of Regulatory Reform to assist their constituents with various workers' compensation related problems they may have. New York Compensation Insurance Rating Board (CIRB) The New York Compensation Insurance Rating Board (CIRB) is a not-for-profit membership association funded by insurance carriers. The CIRB recommends annual reductions or increases in premium rates to the State Insurance Department. The CIRB, which is authorized by law, has a twofold purpose: To determine manual rates for each classification and to provide experience modification rates for employers with premiums in excess of $5,000. To establish the rules and procedures governing the underwriting of workers compensation insurance and employer liability insurance, including classification categories and rates,. 20

21 Fraud Inspector General In 1996, legislation was enacted creating an independent Workers Compensation Fraud Inspector General with subpoena power to investigate allegations of fraud against claimants, employers, carriers, providers and others in the workers compensation system. Those guilty of workers compensation fraud can now be charged with a felony and those who commit multiple acts of insurance fraud will serve extended prison sentences. In addition, those who commit workers compensation fraud will be barred from enjoying any benefits received as a result of the fraud, and are subject to an additional penalty equal to the amount collected as a result of the fraud. Employers guilty of workers compensation fraud will also face an adjustment in their experience rating to accurately reflect their position had they not committed fraud. Workers compensation fraud is now a Class E felony, punishable with up to four years imprisonment, $5,000 individual/$10,000 corporate fine, and five years probation. New York State Insurance Fund Because of the compulsory nature of the workers compensation law, the Legislature created the State Insurance Fund to provide insurance to those employers who cannot obtain it from a private insurance carrier. The State Insurance Fund is an independent, quasi-public agency that provides workers compensation insurance to over one-third of the eligible employers in New York State. The purpose of the Fund is to provide insurance to any employer in the state, without regard to experience or size. 21