Insurance rip-off

[pete3799]

I'm an owner operator trucker leased to a small company(3 trucks) he has 2 trucks leased to him, myself and another O.O. and his own 3 trucks for a total of 5.
The company was audited by AIG (his insurance co.) and fined 9000.00+ for not requiring we O.O.'s to provide him with workmans comp ins.(he has W/C on his 3 drivers.)
The state of Vermont (as best that i can determine from their web site) does not require me to have W/C.
1) How can an Ins. co fine someone for not buying a policy?
2) If AIG is saying were in violation of state law why is the money being paid to AIG and not the state? (their making money on a policy they never wrote?!)
This sure sounds like a licence to steal in my book.
Anybody care to fill me in on this?

[The Gaijin]

1.) it may not be a fine per see, but rather treated like un-paid premium. If you had no insurance you might be able to sue and go against his policy. That is a big liablity for the insurance company.

2.) the state would collect a fine, but this looks like a premium payment. The company owner might have been in violation of state law, but a way out of that might be for an insurance company to collect un-paid premium (the $9000) and back-date coverage.

[cashflyer]

Spend the $9k on AIG stock and he'll be a majority shareholder. lol

[pete3799]

Just seems to me that AIG just got another stimulus check that they don't deserve.
If I have to get W/C I can't collect on it as i'm the only employee.WTF?

[cashflyer]

Exactly... WC is not for owners. And as a contractor, he can't put you on his policy.
What you need is not WC. You need what is called "Occupational Accident" coverage.

OOIDA has an affordable OA plan.

[MRM]

This is another example of not understanding an issue and jumping to the wrong conclusions. What happened is the company owner got audited by his insurer to make sure his premiums matched his coverage. Insurance is heavily regulated, and certain benefits are mandated, even if the insured claims he doesn't need them. The result is that a business owner can decline coverage on certain activities, engage in those activities, and still be covered without paying premiums for it. The result is that the insured pays less premium than he has coverage, and the insurer (meaning all the other policy holders with that company) have more risk than they planned for.

An example of underpaying rates could be something like buying insurance based on local travel for non-hazardous cargo only and paying lower premiums because of it. But when te company gets a new contract for hauling hazmat coast to coast, forgetting to update the policy. In this case, the insurer is probably on the hook for any insurance claims, and their only recourse after an accident would be to cancel the account, but they'd still have to pay the risk. Rate fraud is the number one fraud loss for commercial insurers, greater even than pilfering and arson.

So what happened here is that AIG came in to do a rate audit and found that the 3 employee driven trucks had comp coverage, but the 2 leased vehicles did not. Apparently under that AIG policy and/or that state's law, the company owner is responsible for all work related accidents as comp, and must provide comp coverage for all drivers regardless of whether the driver is leased (an independent contractor) or a direct employee. The AIG policy would have paid out if there was a comp claim from any of the five vehicles, but the company was paying premiums for only three. So AIG adjusted the premiums and backcharged for the premiums the company should have been paying but hadn't been.

The failure to pay the comp premiums on the two leased vehicles when state law mandates coverage can be completely innocent, and it sounds like it was here. It is entirely possibe that state law does not require owner/operators to have comp insurance, but that it requires any company that leases owner/operators to provide coverage to the leased drivers. Comp laws vary from state to state and are incredibly complex. Usually there are rules defining who is to be considered an employee (requiring coverage) and who is considered an independent contractor (not requiring coverage). It is very possible to be considered an independent contractor for tax purposes and all other purposes, but be considered an employee by the State Department of Labor for purposes of comp coverage.

It looks like here you and the company made the correct determination that you don't need comp coverage as an owner/operator, but didn't realize there was a second issue of whether a leased owner/operator must be treated as an employee by the company for purposes of comp coverage, even when the tax guys and everyone else says you're independent. The law imposing comp coverage is there to protect you. If you had gotten in an accident and couldn't work, you would have at least had comp coverage, so you weren't at risk for losing everything if you got injured on the job. AIG isn't stealing from anyone, they're just making sure the premiums they receive reflect the risk they are covering and you are the beneficiary of it.

[LWJ]

Ok. I can talk about this because it is how I make my paycheck.

1) AIG gave an audit to the outfit you lease to.
2) It is perfectly acceptable for the company who writes the workers comp to request that all eligible persons have workers comp. If not, then they will be picked up on audit. This is not something that you can dispute.
3) As contractors who are in fact business owners, you are likely eligible to waive workers comp coverage. This is how it works in Oregon, owners can opt in our opt out. It is a choice to make. In Vermont, I have no idea.
4) If you are eligible to waive wc and have done so, you can tell AIG to stick it where ever you wish.

I do not have Vermont insurance license so this only constitutes anecdotal information.
Good luck. PM me if you want to talk off line.

Larry

[pete3799]

MRM,
Thanks for the info.
Just got off the phone with my Ins.co.
Policy...900.00
Since i can't collect on the policy if i injure myself at year end they do an audit and refund 685.00 so the Ins. co collects 215.00 for issuing a policy i can't use...I guess I'm dumb I still don't get it.
So if AIG plays by the same rules as the co. that quoted the above policy how did they come up with 9000.00+

215.00*2=430.00per year (no claims)
9000.00/430= over 20 years of coverage

Co. has only been with AIG for 3 yrs.

[The Gaijin]

Originally Posted by pete3799

Since i can't collect on the policy if i injure myself....

So if AIG plays by the same rules as the co. that quoted the above policy how did they come up with 9000.00+

Most likely you could go against the AIG policy. That may be the difference. And that extra coverage would cost a lot of money.

[dentist90]

Originally Posted by MRM

...
An example of underpaying rates could be something like buying insurance based on local travel for non-hazardous cargo only and paying lower premiums because of it. But when te company gets a new contract for hauling hazmat coast to coast, forgetting to update the policy. In this case, the insurer is probably on the hook for any insurance claims, and their only recourse after an accident would be to cancel the account, but they'd still have to pay the risk. Rate fraud is the number one fraud loss for commercial insurers, greater even than pilfering and arson.

My experience in insurance claims is quite different from this. If they deem that appropriate coverage was not in effect, or that there was an error or misrepresentation in the policy application, their first recourse is to simply deny the claim. The next tactic is to say that the policy was void due to misrepresentation and have no obligation other than to refund your premiums. It is then up to you to appeal and possibly go to court to recover. Insurance companies all have batteries of legal advisors and are usually quite content to find a way to deny a claim.
One example:
An associate of mine (a dentist) accidentally sawed off his right thumb on a table saw. It was reattached, but there was no movement nor sensation in it anymore... he couldn't grasp anything and had no fine motor control. This met the criteria for presumptive disability for own occupation for long term disability, for which he paid extra premiums. Yet the insurance company forced him to undergo neural graft surgery to attempt to get sensation back. When that failed they were forcing him to get a consultation with one of their doctors about amputating the numb thumb and transplanting one of his big toes onto his hand. All of these 'requests' were required or benefits would cease. They were simply trying to find a way to avoid paying out the LTD which would cost them 100's of thousands over my friends lifetime. He had to hire an attourney to argue for him that a toe transplant would not restore his career and the insurance company finally let him get on with his life.
So, in my experience, I see more examples of insurance NOT paying when they should than paying when they don't have to.

[TerryH]

I subcontract for auto dealerships working directly beside their service techs. Liability insurance is required, but because I have no employees, workmans comp is not an issue.

[MRM]

I'm not going to get into a debate about whether insurance companies generall pay or deny meritorious claims. That is a different issue and has nothing to do with the question above. Besides, this issue is a work comp claim in a specific state, not a disability claim in Canada. Very different creatures, both very complex for different reasons. But if oyu think it over, the insurer can't make you go through an operation to get off profession-specific LTD unless that right is written into the policy, and if it is, you're getting the coverage you paid for. Other policies with higher premiums wouldn't have that clause. That's why you buy insurance through a broker like LJW. They make sure your expectations line up with what you purchase. FWIW, what you described is unlikely to happen in the US. I'm pretty sure ERISA wouldn't alow it.

Anyway, what Gaijin said is almost certainly correct. It looks like the AIG policy has to cover all work-related injuries, contract employees or direct employees. That obligation probably is imposed by the state, so if AIG covers anything it has to cover everything. They're just adjusting their premiums to reflect that they carry comp liability for two otherwise uninsured drivers. That is a lot of liability.

Now if the drivers can get other insurance that will be primary to AIG's coverage, then AIG will probably reduce its coverage and premiums accordingly, but right now, they're on the hook for five drivers, regardless of whether the drivers want the coverage because the state tells them they have to be, so they're going to charge premiums for five drivers.

[m21sniper]

I got ran over on the job in front of a house my company sent me to, repossessing a vehicle they sent me to get. There were witnesses, an arrest, and a police report.

That was in December, my WC insurance company STILL has not paid me yet. They outright denied the claim, wouldn't even pay for medical care! I had to get a lawyer, the whole nine yards. Grrrrrrr.

Insurance companies are theiving scum.

[pete3799]

Thanks to all who replied.
Back in the late 70's I was leased to a Co. that required W/C,I ripped my finger off (don't ask)
while on the job so I call the Ins. Co. their reply was "not covered"
But on the bright side I have recouped some of my premium money back as 9 fingered gloves are much cheaper.