California Insurance Commissioner Announces Rate Cuts for 2019

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

California employers received some great news regarding their Workers Compensation premiums for 2019. On November 6, 2018, Insurance Commissioner Dave Jones recently announced his decision to cut California Workers’ Compensation advisory pure premium rates by 8.4% significantly higher than the initial recommended 4.5%. This change will affect policies that renew or incept on or after January 1, 2019.

To learn more about how this decrease will affect your company’s workers’ compensation premium in 2019, contact Rancho Mesa Insurance Services at (619) 937-0164.

Understanding Waivers of Subrogation for Contractors

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

In an era where general contractors commonly require a Waiver of Subrogation from its sub-contractors before they are allowed to step foot on the jobsite, it is important to understand how a Waiver of Subrogation functions. Most companies simply tell their agent they need the waiver added to their policy, but what does this mean? How does it affect the policy?

Subrogration is "the legal process by which an insurance company, after paying for a loss, seeks to recover all or a portion of the loss from another party who is legally wholly or partially liable for that loss," according to the Workers' Compensation Insurance Rating Bureau of California (WCIRB). So, a Waiver of Subrogration prevents your insurance carrier from recovering funds paid on a claim from the named party requesting the waiver.

When subrogating, three things must be established:

1) The defendant was negligent (or that a product was defective),

2) Negligence proximately caused the damages for which the carrier paid, and

3) The amount and nature of the damages.

 If you cannot establish any one of these three, there will be no subrogation.

Subrogation is used throughout various lines of insurance. It is very common in dealing with auto insurance claims. If you are in an accident and the other driver is deemed to be at fault, your insurance company will respond first by paying to have your vehicle fixed. Then, the carrier will collect from the at fault driver’s insurance company to recover the amount they had to pay to fix your car. The insured’s carrier jumps on the claim immediately so that the insured will not have to wait for the claim to be disputed and resolved before their car is repaired. Claims are handled the same for every line of insurance, unless there is a Waiver of Subrogation in place.

When a sub-contractor is hired and has signed a Waiver of Subrogation for the project owner or general contractor, they are essentially waiving their carrier's ability to recover the money that was paid out on a claim that was caused by a third party's negligence. Waivers of subrogation often come in two formats. Either, the waiver specifically names an entity that the carrier waives its’ right to subrogate against, or a Blanket Waiver of Subrogation. If a Blanket Waiver of Subrogation is provided, the carrier must obtain permission from the named insured to subrogate against a third party.

When adding a Blanket Waiver of Subrogation to a policy, there is an additional fee to offset the carrier’s ability to reclaim money from any losses that were caused by a third party's negligence. These fees can change from carrier to carrier and it is a good move to review each policy to know exactly what you are paying for waivers. Adding a blanket waiver of insurance does not increase coverage or limits, it simply absolves an owner/general contractor of their liability.

With Waivers of Subrogation becoming more prevalent, it is easy to see how important it is as a business owner to know exactly what is covered and what you are waiving.

If you have any questions or would like to understand subrogation further, please contact Rancho Mesa at (619) 937-0164.

Six Reasons a Company’s Experience Modification Could be Recalculated

Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.

Workers’ Compensation costs continue to be one of the most costly expenses for business owners in California. With recent reform, California has maintained steady rate decreases in the workers’ compensation marketplace. Unfortunately, California still maintains some of the highest rates in the country, often times two to three times the nations average.

Controlling insurance costs is vital to staying profitable and often times, staying in business.  An important way business owners can control their insurance costs is by controlling their Experience Modification or X-MOD. An X-MOD is a benchmark of an individual employer against others in its industry, based on that employer's historical claim experience. This comparison is expressed as a percentage which is applied to an employer's workers' compensation premium.

The premium impact of a credit X-MOD (less than 1) vs a debit X-MOD (more than 1) can be significant. Business owners budget around their insurance costs. When there are unforeseen changes to their insurance costs it can have a dramatic effect. While it is rare, there are situations when an X-MOD can change in the middle of a policy term.  Below are six circumstances when this could happen:

1. If a claim that has been used in an X-MOD calculation is subsequently reported as closed mid policy term AND closed for less than 60% of the aggregate of the highest value, then the X-MOD is eligible for recalculation.  
2. In cases where loss values are included or excluded through mistake other than error of judgement. Basically, this rule takes into consideration the element of human error.
3. Where a claim is determined non-compensable. Meaning the injury was determined to be non-work related.
4. Where the insurance company has received a subrogation recovery or a portion of the claim cost is declared fraudulent.
5. Where a closed death claim has been compromised over the sole issue of applicability of the workers’ compensation laws of California.  Basically, if a person passes away at work but it was determined that the person had a pre-existing condition which caused the death, not work itself.
6. Where a claim has been determined to be a joint coverage claim.  This occurs mainly with cumulative trauma claims where there was no specific incident that caused an injury, but an injury that developed over time (i.e., wear and tear).

If any of the circumstances above have occurred, than a revised reporting shall be filed with the Workers’ Compensation Insurance Rating Bureau (WCIRB) and it shall be used to adjust the current and two immediately preceding experience ratings. 

If you would like to discuss this topic in further detail, and learn how Rancho Mesa Insurance can audit your X-MOD worksheet for potential recalculations, please contact us at (619) 937-0164.