Do You Need Workers’ Comp Coverage for Family Members?

One question we get often from small business owners is whether they have to secure workers’ comp coverage for family members that work for them. The short answer is “yes,” in most cases.

Under most state laws, every employer that uses employee labor, including family members, must secure workers’ comp coverage. When we talk about family members we usually mean children, spouses, nieces, nephews, uncles, aunts, grandparents and cousins.

If you fail to include a working family member on your workers’ comp policy, you could risk a fine, so it’s wise to understand the regulations.

Here are a few scenarios:

Your nephew helps in your business for a few hours a day, but you don’t consider him an employee – Under most state labor laws he is considered an employee. An “employee” is defined as someone you engage or permit to work. Even though your nephew is part of your family, he is considered an employee and hence must be covered by workers’ comp insurance in case he is injured on the job.

If the state finds out that you don’t have the necessary workers’ comp insurance, you could face serious consequences including fines and even misdemeanor charges in some cases.

Also, if your nephew got hurt at the store, he (or his parents) could file a personal injury lawsuit against you if you don’t have him covered on your policy.


You run a diner and your daughter works 25 hours a week in the kitchen – Your daughter would be considered an employee subject to workers’ comp laws and she would not be able to be excluded on your workers’ comp (unless of course she was an owner/officer, member or partner).


You have a small business and your husband helps out about 10 to 15 hours per week – Your workers’ comp policy may not have to cover you and your husband.

But it could depend on whether your business is a sole proprietorship (which can be owned by a married couple in many states), a partnership or a limited liability company.

If you are a married sole proprietor, typically your insurance company will consider your spouse a co-owner and exclude them without any question. But different insurance companies will handle this situation differently, so it’s important to know how yours handles it.

If you’re a corporation, LLC or partnership, your spouse cannot often not be excluded merely because he/she is your spouse. If you formed a corporation, your spouse would have to own shares and be a titled officer in the corporation in order to be excluded.

If you formed an LLC, your spouse would have to be member of the LLC in order to be excluded. If you formed a partnership, your spouse would have to be one of the partners to be excluded.

If you have any questions or would like to speak to a professional advisor, please contact ACBI Insurance at 203-259-7580.

Fifteen Warning Signs of Workers’ Comp Fraud

Workers’ compensation fraud costs the insurance industry roughly $5 billion each year, according to estimates by the National Insurance Crime Bureau. And depending on whom you ask, fraud accounts for as much as 10% of the costs of all workers’ comp claims.

This type of fraud is typically associated with malingering employees who fake injuries in order to collect compensation and some paid vacation time.

In tougher economic times, particularly as lay-offs mount, some experts think there is an increased exposure for employees to claim a work-related injury for a variety of manufactured reasons, such as for an injury that occurred on personal time.

Anytime you feel you have a suspicious claim on your hands, look for these tell-tale signs of potentially fraudulent claims. Usually one of these items alone is not enough to point to fraud, but if you have two or more of them, it could suggest a problem.


  1. Late reporting. If you have an employee who suffers a legitimate on-the-job injury, they will generally report it right away. Late reporting may not always be indicative of a fraudulent claim, though, because sometimes the true effects of an injury may not be known until the following day.
  2. The Monday morning claim. If the injury allegedly occurred on Friday, usually late in the day, but did not get reported until Monday, there is reason to suspect there might be a little more going on than meets the eye. The logic is that the employee likely suffered an injury over the weekend and does not want to pay for it themselves if they lack health coverage, or if they don’t want to foot the bill even for their coverage deductible.
  3. Lack of witnesses. Often your employees won’t be working in a solitary environment and there ought to be somebody on your staff who witnessed the accident. Still, not every claim has a witness and this should not be used solely to determine fraud.
  4. Sketchy details or conflicting descriptions. Most claimants can recall the details of their injury. If the claimant seems to be fuzzy on the details and gives vague responses to questions, it could be a warning sign.
    Also, if the employee’s description of the accident conflicts with the medical history or First Report of Injury, there may be a problem. This could arise if, upon further investigation, the employee keeps changing the story and adding or removing pertinent information – a good reason to suspect it to be a fraudulent workers’ compensation claim.
  5. Disgruntled employee. A disgruntled employee is more likely to place fraudulent claims than an employee with high job satisfaction.
  6. Financial hardship at home. Workers’ compensation benefits are sometimes seen as a way out of a tight financial situation at home. Although temporary disability benefits are lower than normal working wages, the worker could use the time to “double dip,” that is, take on extra work when they are supposed to be at home recovering from the alleged injury.
  7. Hard to reach. This ties in with number 6. If this occurs every time the claimant is called, there is a possibility of fraud.
  8. Misses medical appointments. If an employee is truly injured, they want to get better and will make sure to go to all medical appointments. Missing appointments is another reason to suspect fraud.
  9. Engaged in activities not consistent with the injury. If your employee reported a back injury and other employees find that he is playing softball on the weekends or renovating his yard, there is good reason to suspect fraud.
  10. Employment change. The employee reports the injury right before or after being laid off, near the end of a contract job or near the end of seasonal work.
  11. Post-termination claims. If an employee files a claim after being laid off or fired, red flags should pop up.
  12. Frequent moves and changes. The claimant has a history of frequently changing physicians, addresses and places of employment.
  13. History of claims. If the claimant has filed suspicious or litigated claims in the past, they could be a person who feeds off the system.
  14. Employee refuses treatment. There should be no reason that a legitimately injured worker refuses a diagnostic procedure to confirm the nature or extent of an injury.
  15. Rigorous hobby. If the injured worker has a pastime that could cause an injury similar to the alleged work injury, the claim could warrant further investigation.

Remember, if you suspect fraud, you should talk to your broker or the insurance company claims representative to alert them. All insurance companies are required to have special investigation units that look into claims fraud. It benefits both you the employer and the insurer if the insurance company investigates and ferrets out a fraudulent claim.

If the insurer suspects fraud, they can reject the claim and report their suspicions to the local district attorney’s office and the Department of Insurance.

If you have any questions or would like to speak to an advisor, please call ACBI Insurance at 2030-259-7580.

Questionable Workers’ Compensation Claims are on the Rise

Researchers analyzed past workers’ compensation claims that were considered questionable by referrals, and the reports were submitted over the span of about six months. Although the total number of workers’ compensation claims submitted had dropped, the number of claims considered questionable had risen. Questionable claims are ones that experts at insurance companies refer to the National Insurance Crime Bureau for review. When the reports are submitted for review, they are closely analyzed for indications of fraud. In some cases, one report may have several red flags that put it in the questionable category.

The state with the highest number of questionable workers’ compensation claims was California, which had more than 2,250. Illinois followed with almost 700, and New York was close behind with nearly 690. In 2011, there were more than 3.3 million workers’ compensation claims in a major database. The number decreased to about 3.2 million within the span of one year, and it decreased again in 2013. There were about 3,475 questionable workers’ compensation claims reported to the NICB in 2011, and that number increased to more than 4,450 in 2012. This means that claims increased by more than 25 percent. During the first half of 2013, there were about 2,325 questionable claims submitted.

When it came to further describing questionable workers’ compensation claims, there were several reasons experts said they referred them. The main reasons were claimant fraud, prior injuries not related to work and malingering. There were more than 6,100 claimant fraud cases, more than 2,300 non-work-related prior injury cases and more than 1,375 malingering cases. Non-work-related injuries pertain to people who claim injuries during days off or recreational days but do not report the incident until they return to work. When they return, they claim the injury happened while they were on the clock. Malingering occurs when a claimant sustained a legitimate injury but kept pretending to experience symptoms in order to collect benefits much longer than necessary after recovering.

Insurance fraud is a growing issue for both consumers and insurers. Many companies are taking steps to prevent it from happening and are also working on ways to improve identification of signs of fraud. If fraud can be prevented before claims are paid, this helps keep premiums more affordable for consumers. When consumers suspect or know of someone committing insurance fraud, it is important to report it. To learn more about this issue or how to report fraud, call ACBI at 203-259-7580 or visit our website.

Real Life Case: Underreporting Payroll for Workers Comp

Some business owners think they can hide or under-report payroll data as a way to save money on taxes and workers’ compensation premiums. There are several different ways they can hide payroll data, but it is still a crime that very few prosecutors will turn down. Although this is done to save money, the price of self defense in criminal court and the repercussions of having a criminal record are both costly. In addition to this, the risk of ending a business career can compromise a person’s long-term income. The following is a case where a business lost about $100,000 by trying to dodge workers’ comp premium obligations.

The owner of a building company was convicted of workers’ compensation insurance premium fraud for not reporting some of his employees to his insurer or the Employment Development Department. The owner’s daughter was convicted of misdemeanor insurance fraud. Another member of the owner’s family who worked there was convicted of felony insurance fraud.

Experts say fraud is an enterprise that brings in billions of dollars, but it provides artificial inflation costs to insurance companies and consumers. In a collaborative effort by the local district attorney’s office and the Department of Insurance, the investigation on the business owner started after an employee was injured. The owner paid his workers in cash in order to avoid paying insurance premiums. However, the investigators found evidence that all three of the convicted parties had worked together to convince workers to take cash payments.

The employee who was injured required surgery, but the business owner tried to dispute the worker’s claim. Instead, the owner offered the injured worker a disability application form for state assistance, and he instructed the worker to claim the injury occurred at home. The company was ordered to pay more than $45,000 in premium restitution, about $30,000 in EDD back taxes and more than $35,000 in restitution to the injured worker.

It is not easy to hide payroll information, and employees will be vocal if they are injured. In addition to this, there are other ways to track this type of fraud. If an employee is injured, employers should remember that any under-the-table agreements will likely be exposed. Injured employees must look out for themselves and their families. Many other cases are worse. Employees may accumulate higher bills for hospital stays and rehabilitative services. The cost of paying their bills could be much higher than $100,000, and the cost of business disruptions and legal fees would run into the hundreds of thousands. Recovering from an incident such as this is also difficult, and most business owners have to start over from scratch. In comparison with the cost of such a mess, the cost of workers’ compensation insurance premiums is minimal. Every employer should remember that it is not worth the risk.

If you have questions about your Workers Compensation protection or are looking for tools to control the cost, contact ACBI at 203-259-7580 or visit our website.

How to Detect Possible Workers’ Compensation Fraud

Twenty-five percent of all United States insurance fraud claims are related to workers’ compensation. Employees throughout the country report about $7 billion worth of personal injuries occurring in the workplace or while they are on the clock but off the premises. Although small businesses are least likely to be able to cope with the ensuing expenses, they are the ones that are hit the hardest each year by workers’ compensation claims.

It is important for every small business owner to evaluate his or her plan to stay protected from workers’ compensation fraud. There are several ways to detect it, and these five signs are some of the most common indicators.

1. Injury Time Look for accident reports that are filed on Monday and especially during the morning hours. When people injure themselves away from work during the weekend, they may come to work on Monday and fake an injury. It is important to ask other employees how the injured worker was acting immediately prior to the alleged incident. If they noticed signs of injury before that point, it is likely the employee is trying to commit fraud.

2. Lack Of Witnesses In many cases of workers’ compensation fraud, there are few or no witnesses. An employee will usually pick a moment when nobody else is around for the time of the non-existent accident. This can be hard to determine if the employee is alone often, but if he or she is rarely alone, this is a big red flag.

3. Repeat Claims More than 35 percent of workers who file claims also file other claims after that. These can trigger fraud alerts, but they should also serve as warnings to business owners to examine their operations and workplaces. If the conditions that caused an initial injury have not changed, it is very likely for another injury to occur. Employers in such situations will have a difficult time making a strong legal case.

4. Motive This is an important consideration for every employer. If the worker had a possible motive to claim a fake injury, it is important to address that. This could be a notice for dismissal, a raise being withheld or any other variety of reasons that made a worker upset.

5. Inconsistency And Body Language It is common for people who are being dishonest to show it in their body language. Long pauses before answers, shifty eyes and excessive fidgeting are common behaviors when people are telling lies. Listen carefully for any inconsistencies in a worker’s story about an accident, and look closely at the documentation to make sure the stories match. Clear evidence is needed to make a solid case in court, and instincts alone will not cut it.

Whenever a workers’ compensation fraud case has been clearly documented, it is important to report it to the workers’ compensation fraud investigation department in the state of residence. The Department of Labor provides information about this for every state. The best way to avoid workers’ compensation claims and fraud is to provide a safe workplace. When workers voice their concerns about any working conditions, it is important to take the necessary steps to remedy any problems. By keeping the workplace safe and making safety a top priority, employers can help their workers avoid injuries and show them that their health and safety are important to them.

How to Prepare for a Workers’ Compensation Audit

The mere mention of a workers’ compensation audit is enough to strike fear in nearly any business owner. For anyone who is scheduled for an audit, there is no need to worry or be fearful. With a little bit of common sense and preparation, much money and aggravation can be spared.

It is important to devote a few hours to setting up preparations. This small step can prevent days and weeks of hassles in the future. Business owners should plan to give their full attention to the auditor throughout the process, which can take several hours from start to finish. For this reason, it is important to make sure the time and date are both convenient. If the audit has been rescheduled or was not set for an appropriate time, call to reschedule it.

Start collecting and organizing and records that show payroll reports and overtime. Make sure insurance certificates and classification divisions are also available. Write up a summary of each one to make explanations easier and to more effectively communicate with the auditor during the process. If information is organized well, this will help expedite the process. The auditor may feel more comfortable in trusting a business owner’s data if all calculations can be reconciled to payroll records.

Prior to the meeting with the auditor, it is also important to make any necessary adjustments to payroll. For example, a business owner might need to subtract bonus pay from overtime pay. Minimum and maximum payrolls will need to be applied to the calculations when applicable. This may take some research, and the amounts will vary from one state to the next. They also vary between types of careers, partners, executive officers and sole proprietors.

Business owners should make sure they understand all employee job classifications and can explain them clearly to the auditor. They should also ensure employees are properly classified for the work they perform. If the auditor has questions or concerns, this can slow the process down considerably. Auditors usually ask about duties and classifications for multiple employees, so being prepared is essential. For help classifying them, discuss the details and any concerns with an agent.

When working with subcontractors, keep in mind that payments made to them will go against workers’ compensation if they did not have certificates. Ask for copies of their certificates, and check them carefully to ensure they are updated and show coverage for the entire time span when the subcontractor was working. After the auditor arrives, all of these preparations will be well worth the time spent. Most business owners are also pleasantly surprised to find that auditors are not the mean individuals they picture them to be. Most auditors are pleasant and fair, and this is especially true when all of the details are in order.

After the audit is finished, politely ask the auditor for a copy of the worksheet. An agent can review it for accuracy. Every person has a legal right to request a corrected audit if any errors are suspected or confirmed. Business owners also have the right to recover any over-payments that were made under the previous three audits.

If you have questions about your coverage or an audit, call ACBI at 203-259-7580 or visit our website.

Understanding Workplace Injuries, Illnesses and Saftey Hazards

Illness and injury prevention programs are useful for lowering the likelihood of occupational injuries, fatalities and illnesses. There are many workplaces that have already put safety measures in place. One common way they do this is by participating in OSHA’s Voluntary Protection Programs. They may also enroll in Safety and Health Achievement Recognition Programs, which are designed for smaller employers. Research shows that workplaces participating in these programs experience fewer injuries, and they usually report transformed cultures in the workplace that lead to higher quality of work. They also report better overall productivity, less turnover, greater worker satisfaction and reduced overall costs.

In addition to several other nations around the world, there are 34 states that encourage or require workplaces to have such programs in place. Since these employers have reported positive experiences with their programs in the United States, OSHA believes that prevention programs can create a solid foundation that will promote positive changes in the ways employers and their employees control and identify hazards. They say this leads to a better, safer and healthier work environment for everyone.

Adopting a prevention program will help reduce the number of workplace injuries, illnesses or fatalities. In addition to this, employers will have the opportunity to better their compliance standards with existing ones, which will give them the benefit of experiencing better finances and a safer environment. Prevention programs should have evaluation, identification and control measures for the workplace. These should be aimed at any existing hazards, which is something that will vary from one workplace to another. Some specific tasks should also be assigned to various workers, managers or supervisors.

There are several elements that comprise an effective plan, and these include the following:

– Management should establish concise and clear health and safety goals for the program, and these should provide definitions for the actions that are needed to reach the goals.

– Management officials should choose one or more workers who are responsible to maintain and implement the program.

– Workers should communicate with other workers who are implementing and developing programs to ensure they are involved.

– Management should provide adequate resources to make sure programs are implemented effectively.

– Management should include designated workers in any workplace inspections or investigations following any incidents.

– All workers should be encouraged to report their concerns about injuries, hazards, near misses and illnesses.

– Management should document and assess hazards in the workplace by asking for workers’ input and looking carefully at any available information about hazards.

– Employers must always inform their workers of known hazards in the workplace.

– Employers must protect their workers’ rights if they participate in these programs.

– If injuries occur, employers should investigate such incidents to identify hazards and what caused them.

– Employers should establish a plan that prioritizes dealing with various hazards.

– Employers should verify that all measures for any controls are effective.

– Management should provide interim controls that are designed to protect workers from hazards that are not immediately controllable.

– Employers must provide training and education to workers in languages they understand to ensure they know what to do.

– Employers should talk about hazard control plans with any workers that will be affected by the specific hazards.

– Workers should understand all of the procedures for reporting illnesses, injuries and safety concerns.

– Workers should know how to identify, control, reduce and eliminate hazards.

– Workers should understand all of the elements of a program and how to participate in it.

– Employers should offer refresher courses for the program periodically.

– Employers should look for ways to improve their programs regularly, and they should evaluate program effectiveness each time.

Employers have many responsibilities when it comes to keeping their workers safe. Every workplace has its own types of hazards. Although precautions reduce injuries, it is important to be fully prepared for when accidents happen anyway. To learn more about this topic, call ACBI at 203-259-7580 or visit our website

What are Loss Runs, and How Do These Reports Affect You?

From time to time, you’ll be asked to provide a loss-run report, either on a new insurance application or on a renewal.  What exactly are loss runs, and why do insurance companies request them? What follows is an explanation of everything you need to know about loss runs and how they affect your application or policy renewal.

Loss runs are reports that provide a history of claims made on a commercial insurance policy. Typically, an insurance company will request up to five years of history, or for however long coverage has been provided. A claims history is one of a number of factors that are taken into consideration when your application is being underwritten. If an application is approved, it can also have an effect on the premium, either with credits or surcharges, depending on the history.

What details are included in a loss-run report? The report will include the named insured, the policy number, the date of each claim, and the amount paid or on reserve, and it may also include a brief description of the claim. Each claim is listed on its own line. The report will also specify whether each claim is open or closed. If you have had coverage with more than one insurance company, then you will need to request a loss run from each of these providers.

To request a loss run, you will need to send a letter to either the agent or the insurance company. The letter should include the name the policy is insured under, the policy numbers, and the number of years or policy periods for which you are seeking a history. In most cases, your agent can assist you with this process or provide you with a template letter. In some cases, an agent or company will provide this by way of e-mail or phone call. In most states a company is legally required to provide your loss runs within ten business days.

In some cases, you will be asked to provide loss-run reports every year, even if your policy is insured with the same company. There are a number of reasons for this. Most liability policies are occurrence policies, and this means that a claim may be filed at any time as long as the incident occurred during the policy period. An updated loss-run report will indicate if there are any new claims. Another reason for an updated loss run may be due to an open claim. Open claims are never finalized until they’re closed, and this is when the final, updated details are provided, which can affect both the approval and the premium of a renewal policy.

A claims history can have an effect on your company’s insurance rates. This is why it’s very important to practice risk management in order to prevent potential claims. Businesses can also avoid claims submissions  by establishing high deductibles and processing smaller, property-only claims through a reserve fund. Liability claims should never be handled by your company unless you have in-house counsel to manage claims incidents. These steps can help save your company thousands of dollars in the long run while maintaining good rates and producing loss-run reports that are viewed favorably during the application and renewal process.  ACBI can help by reviewing your coverage and providing expert advice.  You can contact our office at 203-259-7580 or visit our website. 

Workers’ Comp: Understanding How Experience Rating Works

Many people wonder why it is necessary to use experience rating to predict future losses if workers’ compensation rates are designed for this purpose. Experience rating can benefit employers. The prospects of both bad credits and debits are implicit in the majority of risk-specific programs dealing with experience rating. Since it gives an employer some influence in how much the final premium will be, this gives an incentive for them to develop their loss prevention strategies. It is also good for them to form incentives that encourage injured employees to return to work as soon as they are able. When this happens, experience rating can be beneficial to employers by increasing occupational safety and health.

Experience rating shows a refinement in processes of premium determination. It creates a net premium cost for employers, which means their costs will be appropriate for the provided coverage. Experience rating shares or spreads the cost of a loss with all group members who are likely to go through similar losses. Although the probability and cost of injuries for an entire group as a whole may not be accurately predictable, it is not possible to decide which member of the group will ultimately be responsible for costs.

This is why there is insurance. If it were possible or easy to predict, group members who do not experience loss would not have any incentive to purchase coverage. Meanwhile, the premium charge for members experiencing losses would need to include the loss costs. Serious injuries to individuals are usually rare, but the totals can be minor amounts or reach well into the millions. For workers’ compensation, the easiest rating method is manual rating. With this system, employers are categorized according to business classifications or operations. Group losses are estimated and then added as an average.

Employers are assigned to specific classifications to make sure the rates they receive are reflective of the costs all similar employers have. While each classification comes with similar risks, individual ones are different in some ways. However, experience rating is designed to reflect individual differences. Insurance providers would be able to look for employers with lower costs and avoid ones with higher costs if the rating system were only manual. The system needs to be refined to avoid such a scenario, and experience rating falls under that category.

With workers’ compensation experience rating, individual employers’ loss and payroll data are analyzed over time. The most recent three years of data is reviewed against similar groups’ risks to determine the experience modification. An employer that has better experience ratings will be given credits, but those with less will be given debit ratings.

ACBI has a unique tool to help you analyze your workers’ compensation experience and costs.  Call us today at 203-259-7580 or visit our website to learn more.