Question: What is the fee for terrorism on my Florida workers’ compensation policy?

The fee on your policy is approved by the state of Florida. Since the terrorist attacks of September 11, 2001 workers compensation insurers have been taking a closer look at their exposures to catastrophes, both natural and man-made. Workers compensation claims for terrorism could cost an insurer anywhere from $300,000 to $1 million per employee, depending on the state. As a result, firms with a concentration of employees in a single building in major metropolitan areas such as Miami or near a “trophy building” are now considered high risk, a classification that used to apply only to people in dangerous jobs such as roofing. Florida allowed a mandatory fee for terrorism to be added to all workers’ compensation policies. The fee is based on payroll and the rate of 0.03 per $100 units of remuneration is added to the policy premium after the manual premium, experience mod, and safety credits have been applied. Please clich here for more information on computing worker’s compensation premiums in Florida.

Question: Why have the rates for workers’ compensation in Florida gone down so much over the past few years?

In Florida, the workers compensation rates have fallen more than 50 percent since a 2003 reform measure tightened the definition of permanent disability, made it harder to collect benefits for mental impairment and also limited the fees of attorneys who represent injured workers to a maximum of 20 percent of the award they obtain for their client. Since 2007, there was an average rate reduction of 18 percent. Overall, Florida now has one of the lowest rates for workers compensation of any state in the country.

The attorney fee provision that accounted for a large part of the drop in rates is currently being challenged. Prior to 2003 attorneys charged hourly rates, which in some cases far exceeded the amount of money they collected for their client. Trial attorneys are arguing in court that the fee limitation is unconstitutional in that there are no similar restrictions on the fees of defense lawyers who represent the workers compensation insurer and they are asking the Florida Supreme Court to reinstate hourly rates. At the same time, injured workers with small claims complain that they cannot find attorneys to accept their cases. In the case before the court, Murray v. Mariner Health, the claimant’s attorney submitted a bill for 80 hours and asked the court to overrule the fee provision. The claimant received $3,224 in benefits. Oral arguments are scheduled for the fall of 2008. Could this be the end of Florida’s falling workers’ compensation rates?

Question: What class code do I now use for the workers’ compensation insurance on my janitorial business?

There were two classifications used for janitorial businesses in 2007 that are no longer in use:

9000 - This classification is assigned to insureds who contract with others to provide both commercial and/or residential janitorial services excluding washing of windows. This class does not include painting, maintenance, or repair on the customers’ premises. Code 9000 is assigned to cleaning and sanitizing rest rooms and the cleaning of interior walls as well as routine dusting, vacuuming of rugs and emptying ashtrays. It can also be assigned to residential chimney cleaners and residential boiler cleaners. The rate for this classification was 6.29 per $100 of payroll in 2007. Florida no longer uses this classification code.

9001 - This classification is assigned to insureds who contract with others to provide both commercial and/or residential janitorial services including washing of windows. This class does not include painting, maintenance, or repair on the customers’ premises. Code 9001 is assigned to cleaning or sanitizing rest rooms and the cleaning or washing of interior walls as well as routine dusting, vacuuming of rugs, emptying ashtrays and window washing at the same location. The rate for this classification was 9.90 per $100 of payroll in 2007. Florida no longer uses this classification code.

In 2008, all of these businesses are being reclassified to the following class codes:

9014 - This classification code is assigned to businesses primarily engaged in providing janitorial services for others that does not include window cleaning above ground level. Janitorial services are defined as keeping a building clean by routine dusting, mopping, vacuuming, waxing, or polishing of floors, emptying of trash, cleaning or washing of interior walls, and cleaning, sanitizing, and deodorizing of restrooms, and/or keeping a building clean and engaging in various types of maintenance or minor repair work for upkeep of a building. These maintenance or minor repair operations may include, but are not limited to, painting, cleaning windows, changing light bulbs, assisting occupants in the placement of furniture, replacing glass panes, clearing drains, and cleaning carpets. This classification code also includes the drivers of the business. The 2008 rate for the 9014 class code is $5.17 per $100 units of remuneration.

9170 - This classification code is assigned to businesses primarily engaged in providing janitorial services for others including window cleaning above ground level. Janitorial services are defined as keeping a building clean by routine dusting, vacuuming rugs, and emptying ashtrays, and/or keeping a building clean and engaging in various types of maintenance or minor repair work for upkeep of a building. Stated differently, a risk qualifies as a janitorial service if the risk engages exclusively in cleaning a building or performs maintenance or minor repair operations in addition to cleaning a building. This code also includes the drivers in the business. It also includes chimney cleaners and pressure washing businesses that conduct work above ground level. The 2008 rate for the 9170 class code is also $5.17 per $100 units of remuneration.

If you would like more information about either of these classifications or information on how your own employees should be classified, please do not hesitate to contact our office or request a workers’ compensation quote online.

Question: How did I get the premium discount on my workers compensation policy?

The premium discount is a factor allowed by the Florida government to lower the cost of larger workers compensation premiums. The discount was created to reflect the lower expenses incurred by the insurance carrier for handling large insureds. The premium discount factor varies for the size of the account and it is allowed on policies with a premium that exceeds $5,000.

Question: What is the charge for ‘expense constant’ listed on my workers’ compensation policy?

The expense constant is a fee applied to all Florida workers’ compensation policies regardless of premium size and it covers administrative expenses such as policy issuance, auditing, and recording. It is applied at the end of the premium calculations and therefore is not subject to experience modification. Currently, it is 200 dollars in the state Florida.

Question: What is remuneration?

Remuneration is the premium base used to calculate workers’ compensation premiums. It is generally referred to as payroll, but it includes more than the employees’ weekly paychecks. Remuneration is defined to mean money and substitutes for money and it includes the following:

• Wages or salaries, including retroactive wages and salaries
• Total cash received by employees for commissions, draws against commisssions, piecework, profit sharing, and incentive plans
• Bonuses, including stock bonus plans
• Pay for holidays, vacations, and sick leave
• Employees’ share of Social Security and similar statuatory plans even if paid by the employer

 Remuneration excludes some pay received by employees and the following can be deducted from the total remuneration:

• Overtime - the extra amount of pay above the regular wages may be excluded for overtime hours that are worked by employees.
• Tips
• Payments by employees for group insurance or pension plans
• Special awards for invention or discovery
• Severance Pay
• Executive officers have a minimum and maximum limits for their payroll if they are included on the policy
• Partners and Sole Proprietors have a fixed amount of payroll if they are included on the policy

When using remuneration to compute the manual premium on a workers’ compensation policy, you must use it in $100 units. Basically, just divide the total remuneration for each classification code by 100 before multiplying it by the class code’s corresponding rate.

Question: What is a waiver of subrogation?

Subrogation is your right (and therefore your insurance carrier’s right) to recover the cost of a paid claim if the loss was caused by that third party. Many workers’ compensation claims occur due to negligence of somebody outside of your business and your insurance carrier could choose to sue that person or entity to recover the cost of the loss. The claim cost will also be adjusted on your experience mod calculations if money is recovered from the third party.

Some contractual agreements, mostly in the construction industry, require you to waive your right of subrogation (and therefore your insurance carrier’s rights) against them in the event of a claim. Before you can waive these rights, you need to complete a form that lets your insurance company know what is happening and thay may request a copy of the contract as well. The insurance companies generally will have an extra charge associated with this endorsement to your workers compensation policy. Once approved, you can then send an updated copy of your certificate of insurance to the party requesting the waiver of subrogation through the contractual agreement. Some insurance carriers will not approve waivers of subrogation and it all depends on the details of the contract and job for which the rights are being waived. Before you decide to waive your rights of subrogation for any contract, you should understand what is at stake.

Often when an employee is injured at work there is some person or party, other than the employer or co-employee, who bears some responsibility for causing the employee’s injury. When someone from outside the employment relationship causes all or part of an employee’s work-related accident or injury, then the claim is able to be subrogated. For workers’ compensation purposes, that individual or entity is known as a third party. The presence of a third party does not excuse the employer from its obligation to pay workers’ compensation benefits if the injury occurred in the course and scope of the employee’s work related duties.

The presence of a third party does, however, change who bears ultimate responsibility for compensating the employee for his or her injury-related losses. Subrogation allows an employer paying workers’ compensation benefits to either step into the employee’s place or participate with the employee in any such lawsuit that the employee might have against the third party. The employer is allowed to participate in an attempt to get back from the third party the workers’ compensation benefits it paid to the employee. Such repayment is allowed because it is the third party who really caused the employee to suffer the loss. The employer’s recovery will be limited to the benefits it has already paid and, in some instances, to benefits it might have to pay. Any portion of an award in a lawsuit that includes amounts for losses paid by workers’ compensation is refunded to the employer or their insurance carrier asserting the subrogation claim.

Usually, employers purchase workers’ compensation insurance to cover their obligations under the workers’ compensation laws and generally the employer’s workers’ compensation insurer, who actually pays the employee benefits, asserts the subrogation claim on the employer’s behalf. Employers should co-operate with their insurer’s efforts to bring a subrogation claim as it directly affects their experience mod and therefore their future insurance premiums. Waiving your right and your insurance carrier’s right to subrogate a claim can have a tremendous effect on your future cost of insurance if a claim occurs that could have had its costs recovered through subrogation.