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.

Question: What is the Jones Act?

The Jones Act is a federal law designed to offer remedy and legal protection to sailors, seamen, and other maritime employees who are not covered by state workers compensation and employers liability laws. The Merchant Marine Act of 1920, also known as the Jones Act, is compensation legislation intended to allow sailors with injuries to recover money to help cover the costs of medical care and health recovery. 

State laws do not apply to employees on wharves, docks, or navigable waters whether they be interstate or international. It allows maritime employees the ability to sue their employers or shipowners should they be injured through the negligence of that employer or shipowner.

The Merchant Marine Act of 1920, also known as the Jones Act, is compensation legislation intended to allow sailors with injuries to recover money to help cover the costs of medical care and health recovery. However, it is not a workers compensation law for seamen and maritime workers. In some cases it is more and in others it is less. Additional benefits apply if the injury is caused by negligence of the employer or by the work environment on the vessel. Injured sailors are entitled to many of the same things covered under other workers compensation laws. Some benefits to which they are entitled are payments when they are disabled or otherwise incapable of working, payment for the costs of medical care and ongoing rehabilitation and transportation costs. In cases where the injury was caused by a negligent working environment, the injured sailor is entitled to additional damages for Pain and Suffering.

The Act covers injured seamen but not longshore and harbor workers. These workers have other federal statutes, such as The United States Longshore and Harbor Workers’ Compensation Act (USL&HWCA), to respond to their injuries, just as laws are in place to protect workers in general. All workers compensation legislation is intended to provide a framework for protecting workers when they become injured. It details the circumstances under which employers, the ship owners in the case of the Jones Act, are responsible for the costs of medical care for an injured sailor, including ongoing healthcare for repairing and rehabilitating that injury.

While the intent of the law is to assist the worker, the original idea behind all workers compensation laws, including the Jones Act, was to reduce the cost of litigation. The overall goal is to provide a fair process that assures the sailor the timely medical benefits he or she is entitled to, without having the financial burden of hiring an attorney, forcing the employer to go to court and having a judge review and assess damages. However, the law is complex and situations may develop where it is in the best interest of all parties to seek the advice of qualified legal counsel.

The Merchant Marine Act of 1920 (Jones Act) is federal legislation (The Jones Act 46 U.S.C.S.App.688 [2002]) and includes admiralty and maritime law. It also applies to workers working on offshore oil rigs. A seaman is defined as an individual engaged or employed in any capacity aboard a vessel, including the master and members of the crew. It does not include scientists on board ships, sailing instructors or sailing school students. Coverage is provided for these exposures by attaching the appropriate coverage endorsements to the standard Workers Compensation and Employers Liability Insurance Policy.

Question: What is the Longshore and Harbors Workers Compensation Coverage?

The Longshore and Harbors Workers Compensation Coverage is provided by an endorsement to the workers compensation policy. It covers workers or maritime employees in positions such as longshoremen, harbor workers, shipbuilders, ship-breakers, ship repairers or other employees engaged in loading, unloading, repairing or building vessels. It also covers employees who work on navigable waters, adjoining piers, wharves, dry docks, terminals, building ways and marine railways. It does not cover masters, captains, or crews of vessels unless further endorsed to voluntarily cover those positions. Associations that operate on the water, especially on navigable waters, such as rivers and oceans, may be required to purchase this coverage.

The United States Longshore And Harbor Workers’ Compensation Act (USL&HWCA) was enacted by legislation in 1927. It is a federal workers compensation law that applies to maritime employees who work on or over navigable waters in or adjacent to the United States. However, it does not apply to sailors, seamen, masters and crews of any ship, vessel or watercraft. The workers subject to this Act are usually not eligible for state workers compensation benefits because they work on or over navigable waters. They are also not eligible for coverage under the Jones Act or the Merchant Marine Act because they are not seamen. As a result, the USL&HWCA was needed to fill the coverage gap for this class of workers.

Question: What data goes into the experience mod calculation?

The experience mod uses your loss data and your payrolls. The loss data is reported to the National Council on Compensation Insurance (NCCI) in the middle of your policy year. Losses include both amounts paid and claim reserves. Your payroll data comes from the audits performed by your insurance company at the end of every policy period. The experience mod calculations look back at your last four workers’ compensation policy periods and only use information on the oldest three policies. They do this because claims on your most recent policy may not have been closed and because they have not been reported yet to NCCI. Click here for more information on Workers’ Compensation Insurance Mods.

Question: Who calculates the workers compensation experience modification factor?

 The National Council on Compensation Insurance (NCCI) is a not-for-profit rating, statistical and data management services organization. They are funded by a variety of workers’ compensation insurance organizations and companies to act as a central source of workers’ compensation data. Part of their responsibility is the calculation of experience modification data. They receive claim and audit information on your business from your insurance company and calculate your experience mod. Please select this link for more information on Florida Workers’ Compensation Experience Mods.

Question: What happened to my sheet metal classification, 5538?

Effective January 1, 2008, NCCI discontinued the use of class code 5538 for Sheet Metal Work.  These types of accounts are reassigned to two new codes:

5535 - Sheet Metal Work – Installation & Drivers (applicable to the installation of sheet metal products

3069 - Sheet Metal Product MFG. (applicable to the manufacturing of sheet metal products by installers of sheet metal products)

Both codes are rated $11.99 according to NCCI’s 1/1/08 rates.  This is a $0.69 decrease from the $12.68 rate for code 5538.

Question: What are the class codes and workers compensation rates for employees doing carpentry?

There are five classification codes used for the workers comepnsation of carpentry businesses in Florida:

2802 - This classification is applicable to businesses whose operations consist of the manufacture and/or assembly of wood products in a shop. The products manufactured typically will not require a high degree of finishing work. If an insured engages in both carpentry shop and installation/erection operations, separate classifications may apply to each type of exposure. For example, preliminary shop carpentry performed by contractors in connection with the building of private residences may be assigned to Code 2802 while the actual building of the dwelling may be assigned to a carpentry construction classification such as Code 5645. Refer to the Basic Manual for rules governing this type of situation as well as the necessary record keeping requirements.The Florida rate for this classification in 2007 was 11.75 and in 2008 it is now 8.15 dollars for every 100 dollars of remuneration.

5437 - This classification code is intended primarily for specialist contractors performing interior carpentry finish or trim such as the installation of paneling, molding, cornices, parquet or finished wooden flooring, mantels, staircases, cabinets and counters. This classification code is not applicable to contractors who perform other carpentry operations in addition to ones listed above at the same job or location, and if other work is done, then the entire carpentry payroll must be assigned to the applicable carpentry construction classification. The Florida rate for this classification in 2007 was 13.01 and in 2008 it is now 10.47 dollars for every 100 dollars of remuneration.

5654 - This classification is assigned when all of the carpentry work in connection with the construction of a private residence is performed by employees of the same contractor, all work including the construction and erection of the sill, rough framework, rough floor, studs, joists, rafters, roof deck, all types of roofing materials, sidewall sheathing, siding, doors, wallboard installation, lathing, windows, stairs, finished flooring, cabinet installation, fencing, decking and all interior wood trim. Carpentry repair or remodeling of private residences is also contemplated under this classification when the work includes some framing or structural carpentry renovation of the premises that would ordinarily be assigned to Code 5645. The Florida rate for this classification in 2007 was 27.71 and in 2008 it is now 20.04 dollars for every 100 dollars of remuneration.

5651 - This classification code is used for carpentry work on dwellings for more than 2 families where all of the carpentry work in connection with the construction of the dwelling, that also must be three stories or less, is performed by employees of the same contractor. This work in this classification includes the construction and erection of the sill, rough framework, rough floor, studs, joists, rafters, roof decks, all types of roofing materials, sidewall sheathing, siding, doors, wallboard installation, lathing, windows, stairs, finished flooring, cabinet installation, decking, fencing and all interior wood trim. Carpentry repair or remodeling of dwellings three stories or less is also contemplated under this classification.  The Florida rate for this classification in 2007 was 17.61 and in 2008 it is now 13.05 dollars for every 100 dollars of remuneration.

5403 - This classification code covers general carpentry work not otherwise classified in NCCI’s Scopes Basic Manual. It contemplates carpentry work of a commercial and industrial nature such as buildings or structures and the construction and repair of dwellings and other buildings that exceed three stories in height. Code 5403 includes interior or exterior framing activities that involve the use of wood and/or light-gauge steel. This code also further applies to the wrecking of wooden buildings or structures including wooden bridges. The Florida rate for this classification in 2007 was 18.25 and in 2008 it is now 14.39 dollars for every 100 dollars of remuneration.

At FloridaWC.com, we can help classify your payroll into the appropriate classification code and would like to provide your construction business with quotes on Florida workers’ compensation insurance. Please give us a call or complete our online workers’ compensation quote request form to get started.