IAASE Newsletter • Fall 2008
IAASE Board of Directors
OFFICERS
John Dowdy, President
5650 Sanderson St, Ste Q
Huntsville, AL 35805
[email protected]
(800) 356-7346 x 208
Ray Fitchner, Executive Vice President
PO Box 3555
Orlando, FL 32802-3555
[email protected]
(407) 388-2602
Eric Gravens, Vice President
10118 Welch Dr
Louisville, KY 40272
[email protected]
(616) 464-7916
Kim Graham, Secretary
31 Rocky Creek Lane
Greenville SC 29615
[email protected]
(877) 431-4563
Donna Harwood, Treasurer
100 N Tampa St, Ste 2650
Tampa, FL 33602
[email protected]
(813) 222-7626
Juanita Lindsey, NSIPA Representative
1515 University Dr Ste 220
Coral Springs FL 33071
[email protected]
(954) 752-1931 x 212
Brad Feldman, Executive Director
IAASE Executive Office
PO Box 1896
Columbus OH 43216-1896
[email protected]
(614) 221-9828
IAASE President’s Comments
By John Dowdy
Thank you for the
opportunity to serve
as the 2008-09
president of the
IAASE. Last year as
vice president was
a great experience.
I worked alongside
many focused
people who did a
phenomenal job organizing the 2008
Annual Seminar in Asheville in what
seemed like far less time than the 318
days we had available in between June
in Delray and April in Asheville.
Thanks to Dan Smith for his leadership
and organization over the past year.
I am convinced that without his
personality and attention to detail, the
many simultaneously moving targets
involved in planning last year’s seminar
would not have come together so
seamlessly. From the infusion of BLF
Management to a seminar planned
without a local chapter as the host, last
year was truly a year of transition. I look
forward to the challenge of carrying the
torch forward in 2008-09 and will no
doubt need the vast expertise of the
IAASE membership to accomplish that.
The 2009 IAASE Annual Seminar
will be held at the Hyatt Regency in
Louisville, Kentucky. The seminar
will open with a reception in a truly
unique environment on Sunday, May
17 and conclude on May 19 after what
may become one of the strongest
educational programs we have had in
recent years.
The property is located in the heart of
downtown, near a multitude of dining
Recently, the hotel hosted a highly
productive IAASE Mid-Term Board
meeting. Many issues were discussed
and some exciting developments are
on the horizon. I will update those
developments in more detail in the
next newsletter. However, I want to
share one of the issues with you now
as I would like to get some feedback
from the membership on the reasons
for the issue and suggestions on
improving the system. That issue
is consistency in national, regional,
and local membership. There are a
growing number of cases where audit
professionals are members at the local
and regional level but are not a member
nationally with NSIPA. I am aware of a
few reasons for the discrepancy but I
would like to know more. Maybe more
importantly, I would like to hear some
suggestions from the membership
on how the system can be improved.
Please drop me an email anytime at
[email protected].
Thanks to everyone for your continued
support of IAASE and I look forward to
a great year!
Table of Contents
IAASE Board of Directors....................................... 1
Frequently Asked Questions: Garage Liability....... 6
IAASE President’s Comments................................ 1
Workers’ Compensation: Insuring PEO’s and
their Client and Employers .................................... 8
IAASE Editor’s Comments..................................... 2
Join the New Premium Audit Listserv!.................... 2
INSURANCE AUDITORS ASSOCIATION
OF THE SOUTHEAST NEWSLETTER
The purpose of this newsletter is to share information.
Therefore, the articles are published as submitted by the
membership. The Insurance Auditors Association of the
Southeast Accepts no responsibility of the absolute accuracy
of the articles published, as they are not for the sole purpose of
education or accreditation.
and entertainment establishments
and a number of local and historical
Louisville attractions. A short drive down
one of several interstate highways
leads to Churchill Downs, a variety of
distilleries open for tours and a nearby
casino. Between the local attractions
and the strong educational program
that is being planned, I know that the
Louisville and the Greater Western
Kentucky area will be the place to be in
May 2009. I look forward to seeing all of
you there!
Workers’ Compensation Classification Quiz........... 3
Remaining Calm in a Dangerous Situation............ 4
The Survival and Existence of the
Local Chapters..................................................... 12
IAACS, IAASE, IAASW 2008-09 Sponsorship
Order Form........................................................... 14
Audit Experiences.................................................. 5
Columns & Rows • Fall 2008 • 1
IAASE Editor’s Comments
By Denise Smith
IA
9
200
ar
And please remember that each
chapter is responsible for two articles
per year in addition to the speaker
recaps. Articles may be submitted to
[email protected].
ANNUAL
E
S
se
A
in
The passing of the election marks the
beginning of two months of holidays,
holiday parties, shopping, cooking,
eating, etc. I wish you all a Happy
Thanksgiving and a Merry Christmas.
Hope to see you all in Kentucky in
May 2009.
Save the Date!
m
By the time this issue of Columns
& Rows is produced, our Country
will be under new leadership. The
Presidential election is a big day for
politics. More importantly, it is a big
day for America. I hope each and
every one of you exercised your right
to vote. And, as Thanksgiving Day
approaches, I hope that each of you
take time to thank a Veteran for their
service to allow us to live in a free
country where we can exercise
our rights.
LOUISVILLE, KENTUCKY
Hyatt Regency Louisville
MAY 17-19, 2009
Join the New Premium Audit Listserv!
The NSIPA Listserv is now called the
Premium Audit Listserv, and it includes you,
the Insurance Auditors Association of the
Southeast, along with the Insurance Auditors
Association of the Central States (IAACS) and
the Southwest (IAASW).
The Listserv is similar to an online forum,
except it is conducted via email. It will improve
communication among like-minded members,
allowing you to benefit from the experience,
knowledge, and wisdom of your peers.
To sign up for the Premium Audit Listserv if
you are not an NSIPA member, only a member
of IAASE, then send us your name and email
address to [email protected] with the
subject, “Subscribe to Listserv.” This email
address will be used to sign on to the Listserv
along with a password, which we will provide
for you. You may change this password later if
you wish.
To sign up for the Premium Audit Listserv if
you are both an IAASE member and a NSIPA
member, then log on to the members only
section of the NSIPA website and click on the
“Discussion List Central” link.
Once you sign up you will receive an email
confirmation that explains how to get started
and how to use the Listserv.
With this new expansion of Listserv members,
now is a great time to join! Don’t miss out!
Columns & Rows • Fall 2008 • 2
Workers’ Compensation Classification Quiz
By Dan Smith, IAA of South Florida
Circle the letter or letters that
apply to each question.
1. The insured is an underground
utility contractor, installing water
and sewer lines. Employees
perform excavation, pipe
installation, final grading, and
landscaping, finalizing the job.
The insured maintains payroll
records to separate the various
types of construction. What
codes will apply?
A.
B.
C.
D.
6306
6319
6217
0042
2. The insured is an assisted living
facility. An insured subcontractor
performs all facility maintenance.
There is a nursing staff,
foodservice, and a driver. No
employees qualify for code 8810.
What codes will apply?
A.
B.
C.
D.
8824
8825
8826
7380
3. The insured is a contractor
who builds private homes. His
employees pour the concrete
floors, beams, install the masonry
block, and pour the pools. What
codes will apply?
A.
B.
C.
D.
5221
5215
5223
5022
4. The insured is a landscaping
contractor for residential
and commercial customers.
Employees install trees, shrubs,
and sod as well as maintain
existing lawns. Sprinkler heads
are replaced when broken.
Interchange of labor records are
maintained. The insured has a
small nursery for their own use.
What codes will apply?
A.
B.
C.
D.
0005
5183
9102
0042
5. The insured is a general contractor
building private residences. The
employees were performing
debris removal. They paid several
uninsured subcontractors during
the period to perform rough
carpentry, trim carpentry, and
install central air conditioning
units. The uninsured subs were
paid more than the employees.
What codes would apply?
A.
B.
C.
D.
5610
5645
5437
5537
6. The insured is a cattle farm. There
are separate crews that care for
the cattle, grow the hay for the
cattle, and artificially inseminate
the cattle. One uninsured
subcontractor maintains the
buildings and fences. What codes
will apply?
A.
B.
C.
D.
0083
0037
9015
8831
7. The insured has 4,000 acres
of land. There are 2,000 acres
devoted to growing cucumbers
and 2,000 acres devoted to
growing squash. All employees
except the bookkeeper
interchange and there is no
payroll breakdown. What
codes will apply?
A.
B.
C.
D.
0008
0037
8810
0050
8. The insured operates a retail
radio and TV store. There are
employees that work in the store.
Several employees install the
equipment in private homes. There
is one employee that delivers to
the jobsite. What codes will apply?
A.
B.
C.
D.
8017
9516
7380
9519
ANSWERS
1.
2.
3.
4.
5.
6.
7.
8.
A, B;
A, B, C
B, C, D
C, D
B, D
A
A, B, C
A, B
Columns & Rows •
Fall 2008 • 3
Remaining Calm in a Dangerous Situation
By Michel Hall, IAA of Central Florida
My daughter chose to pursue
the same glamorous career as
both my husband and me; she
is a premium auditor for a carrier
in Florida. On the Friday of the
recent tropical storm that wouldn’t
end, Faye, she was involved in
an accident that brought to mind
just how dangerous it is out there
on the road and that we need to
educate ourselves in safety in
our vehicles.
Her car hydroplaned on the
interstate and she slid in the
direction of the guardrail. She
corrected the slide but still had no
traction and went off the road into a
drainage canal. Normally, the canal
would have had little or no water
in it, but we were in our fourth
day of rain and the location was
where the worst of the rainfall had
occurred. When the car stopped,
she was in water too deep to be
able to open her door, and the car
was taking on water.
Now I would never have had the
presence to do as she did – she
got out a waterproof bag and put
her electronics (computer, GPS,
toll transponder) in the bag. She
called 9-1-1 and advised of her
location then called her boss. Her
boss was amazed that she could
calmly call to let her know that she
had been in an accident in the
company car, that she was still in
the car, and that she was trapped
in the water. She had to wait until
the car was filled with water up to
the bottom of the steering wheel
before she could get the door
open and get out. Once up on
the interstate, while talking with
a motorist who had stopped to
assist, her car turned up on its side
and disappeared under the
water completely.
Knowing that I would not have
endured the trauma nearly as well,
I researched how to get out of
a sinking or submerged vehicle.
Here are the facts that I was able
to find.
• A car will have to be
more than 50 percent full
of water before you can
open the door.
• Cars sink at a 45 degree
angle, front end first.
• Bubbles rise to the surface,
follow them.
If you know that you are going
in the water and have electric
windows, try to get them open
before you go into the water. If
you cannot open them completely,
it is better to have them closed
because you don’t know how the
car will settle.
There are several devices that will
assist in breaking a window which
are always difficult to break. Here
is a link to one of them:
www.lifehammersales.com.
Work very hard to control your
panic. Remember that an
unobstructed door that you can get
unlocked will open eventually, and
before the car is full of water. Be
familiar with whether or not your
door locks can be opened if you
lose power under water. Know your
best route to exit. It is always hard
to get out the driver’s window and
door due to the steering wheel.
Here’s to hoping you never need to
know this information.
Columns & Rows • Fall 2008 • 4
Audit Experiences
By Tony Rangel, IAA of Alabama
This happened about 20 years
ago. I had been doing an audit on
a construction company for a few
years. This was when the insured’s
still used the manual payroll cards,
one for each employee.
On this particular account, when
the insured wrote a payroll check
and had to void it, they would
draw a wavy line across the
entry and reissue the employee
another check. The insured used a
bookkeeper who wrote a check to
the employee and did not void it.
She drew a straight line across the
entry and reissued the employee
another check. She then took this
check to the bank and cashed it.
She just happened to have the
same last name of the employee,
so doing this was easy for her.
When she got away with this, she
got brave and started doing it
more often.
One year I went to the insured’s to
do the audit and the bookkeeper
was not there. The owner’s wife
was in the office. She told me
that the bookkeeper had been
embezzling money through the
payroll system using this method.
The owner’s wife caught this
when she noticed that some of the
entries had straight lines across
them instead of wavy lines. When
she noticed this, she called her
accountant who examined the
books and then they called their
lawyer. The insured asked me if I
could re-audit the past two years.
I agreed.
What the bookkeeper had done
is falsify the payroll records,
the W-2’s, the quarterly payroll
tax reports, and the 941’s. She
covered all her bases. I felt a little
silly because I did not catch this
since the payrolls matched the
quarterly reports. I had no reason
to question anything.
Since then I usually watch out
for things like this. But since
companies now use computers,
it is more difficult.
This happened about 25 years
ago. I did an audit on an insured
and the audit produced $300,000
in payroll. The policy had estimated
$200,000. The insured received a
bill for the additional premium.
The insured called me and told
me that when he had taken out
the policy, he told the agent that
his payroll was $300,000. But
the agent wrote the policy using
$200,000 to get a lower premium
so we would write it easier. The
insured was not upset with me or
my company. He was upset with
the agent.
The insured asked me if he could
sue the agent to get back the extra
premium because the insured told
the agent to use $300,000. I told
him that he would have to talk
to his attorney about this. I don’t
know what happened on
this account.
traffic, much like our cities here,
except that everyone does it and
it is expected. My family that lives
there uses buses and taxis a lot. I
have one sister and brother-in-law
that have their own cars. My other
sister and brother-in-law do not
have any vehicles.
My niece, Tonya, had never driven
a car even though she was 24
years old at this time. She had told
us that she had gotten a job with
an insurance company as a clerk.
When the managers found out she
spoke English, they made her an
adjuster. The adjusters have cars
to drive. They had given her a few
quick driving lessons and put her
out on the road.
You guessed it. She had an
accident. In fact, she had three
accidents. But she is a much better
driver now.
On a related note, her fiancé,
George, was in college. Someone
asked him what he was studying.
Since he was learning English, he
answered: “I am studying to be a
liar.” We all laughed. He meant to
say, “lawyer.”
My niece was getting married in
Guadalajara, Mexico, a city of six
million people. The whole family
was planning to go to the wedding.
In Guadalajara, they have a very
good public transportation system.
There are taxis everywhere and
buses run all over the city. People
that do have cars drive very
aggressively, running stop signs
and red lights, changing lanes
without signaling, merging through
Columns & Rows •
Fall 2008 • 5
Frequently Asked Questions: Garage Liability
By Denise Smith, IAA of Mississippi
Question: A franchised dealership
employs eight salespersons, five
of whom do not have a driver’s
license and are not furnished a
demonstrator. They use mass
transit to commute for work.
Should these five salespersons be
charged as a Class IA or a Class
IB employee?
Answer: All of the salespersons
should be classified as Class IA.
The rule states that all “active
owners, active officers, active
partners, salespersons, general
or service managers, and any
other employees whose principal
duty involves the operation of a
covered auto or to whom a garage
auto has been furnished” are to be
included in Class IA. The absence
of the driver’s license and/or the
furnished vehicle does not have
a bearing on the classification
of the salespersons. If all eight
salespersons are active full time,
the charge for the number of rating
units is 8.00.
Q: In some instances, the
dealership owner furnishes a
vehicle to the son or daughter
attending school away from home.
When the son or daughter is not
in school, he or she works at the
dealership to earn extra money.
What classification and number of
rating units should he used for this
one person?
A: This is a common scenario
many auditors face when
performing an audit for a
dealership. The problem is the
student is both an employee for
the time actually worked at the
dealership and a non-employee
furnished a company vehicle.
These two classifications carry
different rating factors and thus,
the problem. If the insured’s
records indicate the payroll and
the actual amount of time worked
by the student, the audit should
reflect these rating units under
the appropriate employee Class
IA. The remainder of the time not
worked by the employee should
be assigned to the non-employee
Class IIA or Class IIB, depending
on the age of the student at the
policy inception. It is permissible to
split the exposure of this individual
between the employee Class IA
or IB and the non-employee Class
IIA or IIB provided the insured has
kept proper payroll and employee
time-worked information.
Q: Why should I list all of the
individuals and their salaries for a
dealership audit when the premium
base is the total number of
rating units?
A: It is common practice for a
dealership to have a significant
employee turn-over during
the policy period. A list of
all employees, salaried and
commissioned, during the policy
period should be developed by
the auditor as the policy covers all
current and previous employees.
The salary noted by the auditor
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5650 Sanderson Street
Suite Q
Huntsville, AL 35805
(800) 356-7346 – Phone
(800) 889-1176 – Fax
[email protected] – Email
Columns & Rows •
Fall 2008 • 6
Frequently Asked Questions: Garage Liability (continued)
and used in conjunction with
another verifiable source record
such as the state and federal
quarterly returns will indicate that
all of the employees have been
accounted for.
If an employee is employed
for only part of the policy term,
determine the prorata factor for
the period employed and multiply
this by the appropriate rating factor
(i.e., divide number of weeks
worked by 52 weeks to determine
prorata factor; then multiply
by rating factor of 1.00 or .50,
depending on whether
the employee was full-time
or part-time).
Q: Should the parts manager be
classified as Class IA if he or she is
provided a company car to be used
exclusively to pick-up parts
from suppliers?
A: Yes. Even though a parts
manager is not one of the positions
listed in the rule, pertaining to
Class IA, a significant part of his
or her job is to pick up parts from
suppliers. Also, a parts manager
should be included in Class IA
if his principal duties involve the
operation of a covered auto.
Q: Should the operator of the
vehicle supplied by the dealership
to a school for use in the Drivers’
Education Program be classified
as Class IIA?
A: No. Rule 68 addresses autos
furnished for regular use to other
than Class I or Class II operators,
for example welcome wagons
or autos furnished to driver
training programs. The correct
classification for a vehicle supplied
to a school for use in the Drivers’
Education Program is 7877 for
private passenger autos and 7878
for trucks, tractors, and trailers.
Q: The service manager of a
dealership receives a company
car that can be used for personal
uses. His wife is not furnished
another vehicle but is allowed to
drive the same car furnished to
her husband. Do I charge for the
service manager as Class IA and
the wife as Class IIA or IIB?
is required by the endorsement to
report, either monthly or quarterly,
the number of covered automobiles
and their value and the number
of trips for pick up or delivery of
vehicles if the points of such pick
up or delivery is more than 50 road
miles apart. The actual rate per trip
is determined by (1) the number
of miles between origin and
destination and (2) the retail price
of the covered automobile.
A: No. If there is more than one
person using any vehicle, use the
factor for the highest rated person
in determining the appropriate
rating unit.
Q: Does the automobile pick-up
and delivery coverage apply to
both franchised and non-franchised
dealerships?
A: Yes. However, automobile pickup and delivery is an automatic
coverage without an additional
charge for franchised dealerships.
A separate charge is made for a
non-franchised dealership that has
the exposure of automobile pickup and delivery. This charge is the
number of trips made beyond a
50 mile radius of the city or town
where operations are conducted
per driver. For example, two drivers
drive in one auto to an automobile
auction and return with the original
auto and the newly acquired auto.
The total number of driver’s trips is
three.
Q: Is Automobile Pick-up and
Delivery the same as Dealers
Driveway Collision Coverage?
A: No. Dealers Driveway Collision
Coverage must be added
by endorsement for both the
franchised and non-franchised
dealership policies. The insured
Columns & Rows •
Fall 2008 • 7
Workers’ Compensation: Insuring PEO’s and their Client and Employers
By Greg Jensen and Kim Graham, IAAC Chapter
Reprinted from
www.mynewmarkets.com
IAA of Carolina’s
Did you know that PEO employees
are not the same as Leased
employees? Read on for
interesting information about PEOs.
By Chris Boggs
Professional employer
organizations (PEO’s) began
their rise after the adoption
of the Tax Equity and Fiscal
Responsibility Act of 1982
cleared a path for the creation
and expansion of such entities.
Over 700 professional employer
organizations operate in all 50
states. According to the National
Association of Professional
Employer Organizations, between
two and three million employees
work under a PEO arrangement
and PEO’s as an industry earned
$61 billion in gross revenues in
2007 (gross revenues are the total
payrolls plus the fees charged by
the PEO).
collectively. Such relationship
is wholly different than a leased
employee or the use of a borrowed
servant as detailed in the
three previous articles. Leased
employees and borrowed servants
are under the absolute control (as
defined by the prior articles) of the
special employer. Co-employment
vests responsibility and control
with both parties to the contract.
PEO contracts are coemployment arrangements
whereby the professional employer
organization and the client with
whom they contract both retain
some right of control over the
individual worker or workers
The National Association of
Professional Employer
Organizations (NAPEO),
www.napeo.org, explains these
responsibilities in their Website
as follows:
IAASE Sponsors
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2-Star HH
1-Star H
Columns & Rows •
Fall 2008 • 8
Workers’ Compensation: Insuring PEO’s and their Client and Employers (continued)
The PEO relationship involves a
contractual allocation and sharing
of employer responsibilities
between the PEO and the client.
This shared employment
relationship is called
co-employment.
As co-employers with their client
companies, PEOs contractually
assume substantial employer
rights, responsibilities, and risk
through the establishment and
maintenance of an employer
relationship with the workers
assigned to its clients. More
specifically, a PEO establishes a
contractual relationship with its
clients whereby the PEO:
• Co-employs workers at
client locations, and thereby
assumes responsibility as
an employer for specified
purposes of the workers
assigned to the
client locations.
• Reserves a right of
direction and control of
the employees.
• Shares or allocates
with the client employer
responsibilities in a manner
consistent with maintaining
the client’s responsibility for
its product or service.
• Pays wages and
employment taxes of the
employee out of its
own accounts.
• Reports, collects, and
deposits employment
taxes with state and
federal authorities.
• Establishes and maintains
an employment relationship
with its employees that is
intended to be long term
and not temporary.
• Retains a right to hire,
reassign and fire
the employees.
When evaluating the employer
role of either the PEO or the client,
the facts and circumstances of
each employer obligation should
be examined separately, because
neither party alone is responsible
for performing all of the obligations
of employment. Each party will
be solely responsible for certain
obligations of employment,
while both parties will share
responsibility for other obligations.
When the facts and circumstances
of a PEO arrangement are
examined appropriately, both
the PEO and the client will be
found to be an employer for some
purposes, but neither party will be
found to be the employer for
all purposes.
•
•
NCCI and PEO Arrangements
NCCI has continued to monitor the
workers’ compensation issues and
problems created when employers
choose to join a professional
employer organization. A 2005
report printed in NCCI’s Workers’
Compensation Issues Report,
www.ncci.com/Documents/ir_
creating_standards.pdf, delineates
and briefly discusses many of the
continuing issues. A few of the
problems and issues discussed in
the NCCI article include:
• Experience Modification
Calculations: Most
states require the PEO
to individually monitor
and report the claims
experience of each
individual client. The
purpose is to thwart the
efforts of employers with
bad experience to escape
their problems by joining a
PEO for a couple of years
then coming back out
and starting over. Since
individual experience must
•
•
be monitored and reported,
the employer’s experience
mod will be correct based
on its experience; they will
not get a 1.0 when they
leave the PEO unless that
is what they have earned;
The ability of executive
officers to exclude
themselves (if allowed by
law); and/or the ability of
sole proprietors or partners
to include themselves
(if allowed by law). The
ability to include or exclude
members of an LLC (based
on the applicable state law);
Problems that might arise
if the employer/client hires
an uninsured subcontractor.
Is the PEO’s workers’
compensation carrier
required to pay as the
statutory employer?
Problems that arise out
of PEO’s being insured in
State Assigned Risk
pools, and;
Are the proper
endorsements in place? For
example, NCCI states in
this article that the Alternate
Employer Endorsement
is not intended for use in
co-employment situations.
However, without using
this endorsement there is
a problem when trying to
effectuate and confirming
the proper dovetailing of
coverage between the
employer/client and the
PEO (this will be
shown below).
The report from NCCI specifically
lists and highlights more problems
than those listed above.
Columns & Rows •
Fall 2008 • 9
Workers’ Compensation: Insuring PEO’s and their Client and Employers (continued)
Insuring PEO’s
Four endorsements are available
for use in co-employment
situations (an additional form may
be necessary depending on the
jurisdiction as detailed below).
Two are client-specific and two
are designed to be attached to
the PEO’s policy. Contractual
agreement between the PEO and
the employer regarding which
entity is responsible for providing
workers’ compensation benefits
governs which endorsements
are used.
Employer/Client is responsible
for providing workers’
compensation. When the
employer/client is contractually
responsible for providing the
benefits, two endorsements
dovetail to provide the necessary
or required workers’
compensation benefits:
• Labor Contractor
Endorsement (WC 00 03
20 A). This endorsement
is attached to the client’s
(the leasing employer’s)
policy. Attachment of this
endorsement extends
benefits to the leased
employees from the
employer’s policy and
essentially provides
additional insured status to
the scheduled PEO. The
use of this endorsement is
coupled with the…
• Labor Contractor Exclusion
Endorsement (WC 00 03
21). Attached to the PEO’s
workers’ compensation
policy, this exclusionary
endorsement excludes
coverage for employees
leased to the client(s)
scheduled in the form. This
endorsement is used when
the client leases employees
on an “other-than-short
term” basis and such
client is charged with
providing the workers’
compensation benefits.
PEO is responsible for providing
workers’ compensation
protection. As above, two
endorsements, one attached to
the employer’s/client’s policy and
the second to the PEO’s, work in
tandem to assure that coverages
mesh as per the contractual
agreement that the PEO will
extend workers’ compensation
benefits to the workers.
• Employee Leasing Client
Exclusion Endorsement
(WC 00 03 22). Attach
this endorsement to the
employer’s/client’s workers’
compensation policy to
exclude the extension of
workers’ compensation
benefits to employees
leased on a long-term basis
from the labor contractor
(PEO) scheduled in the
policy. Only used when
the PEO is responsible
for providing coverage.
The employer/client must
confirm that the PEO
attaches the…
• Professional Employer
Organization (PEO)
Extension Endorsement
(WC 00 03 20 B).
Workers’ compensation
and employers’ liability
benefits extend exclusively
from the PEO’s when this
endorsement is attached
to the PEO’s policy. This
extension only applies
to employees leased to
the client(s) listed on the
schedule.
• Alternate Employer
Endorsement (WC 00 03 01
A). Although NCCI states
that this endorsement is
not properly used in coemployment situations
and even the form itself
does not contemplate its
use in these relationships;
if the insured is located
in a state that has not
approved the PEO
Extension Endorsement
discussed above, this
may be the only way to
extend coverage from
the PEO’s form to protect
the employer/client. This
endorsement is attached
to the PEO’s policy naming
the employer/client as
the alternate employer.
The use of this form in
co-employment contracts
is not recommended and
should be avoided
if possible.
Workers’ Compensation Policies
for Employers in PEO’s
As evidenced by the above
discussion, it is absolutely
essential that the employer/
client have in place a workers’
compensation policy even when
the PEO is contractually providing
coverage. Since both entities are
legally employers and in fact are
the “employers of record,” such
contractual arrangement does
not preclude the necessity
of coverage.
Exposure to a workers’
compensation claim still exists if an
uninsured subcontractor is hired, if
there are employees hired outside
of the leasing contract (temporary
workers, etc.) or any of the other
potential gaps in protection as
Columns & Rows •
Fall 2008 • 10
Workers’ Compensation: Insuring PEO’s and their Client and Employers (continued)
studied, reported and monitored by
NCCI. And while it may seem like a
weak argument, without a workers’
compensation policy in force, the
employer/client has nothing to
which these endorsements can
attach attesting that coverage is
extended from another party.
And if the PEO loses its coverage
or goes out of business suddenly,
the employer is in violation of the
law until coverage can be replaced.
Certainly many employers have
received notice that the PEO with
whom they were contracted is no
longer in business. When I owned
my agency I had a PEO (I bought
it with that set up, I did not create
it). I received a fax one evening
stating that the PEO would cease
to operate the next day; workers’
compensation coverage had to
be placed, immediately, and I
became responsible for payroll
administration and other functions
inherent in human resources
management with just a few
hours notice.
Employers should carry the
workers’ compensation policy even
if it must be set up using “If Any”
payrolls. The cost is very low for
the protection it provides. A central
theme of risk management is “don’t
risk a lot for a little.” The small
premium may avoid big problems.
Your next
business
partner.
214 W 35th Street · Davenport, IA 52806 · 800.437.6754 · www.insaudit.com
Columns & Rows •
Fall 2008 • 11
The Survival and Existence of the Local Chapters
By Joel Parquette, IAA Kentucky
Is your chapter similar to ours?
One year ago we were lucky if
we had three to four members
attend a meeting. With numbers
this low it made it difficult to have
a professional presentation or
meeting with any substance. The
local auditors’ meeting was almost
more of a social hour than a
business meeting.
Then slowly things began to
change. We changed the location,
day, and time of the meetings.
We picked up one new member.
Other members made more of a
commitment to attend meetings.
The next thing we knew we added
a couple more members. This
gave us eight or nine auditors at a
meeting. Now it was easier to have
a presentation.
Now with a more organized
meeting, we gained more
members. The newest members
were eager to join and wanted to
participate. They wanted to be part
of a professional organization to
improve their knowledge and meet
other auditors in their local area.
How do we accomplish this? We
are trying to recruit new members
from some self insurance funds.
We want to encourage auditors
from both carriers and service
companies to feel welcome and
feel that the time they spend at
a monthly meeting is worth their
time. However, we cannot do all
this on our own.
Now, here we are one year later.
We had to change the meeting
location to a restaurant with a
private meeting room better suited
to hold a professional meeting.
Presentations for the next couple
of months are already planned.
We are looking forward to the best
year our local chapter has had
in years.
What is our next step to make the
local chapter even stronger? We
are trying to recruit more members.
The more members, the easier it is
to have a meeting if some cannot
attend, plus the presentations have
better content. The more members,
the easier it is to spread the load
of the chapter around and make
everyone involved.
If you belong to an organization
that supports the regional or
national organizations, ask yourself
who from your group is supporting
the local chapters. If there is a
local chapter close to any of your
auditors, why are your auditors not
joining in and attending meetings?
Can your auditors not benefit from
the knowledge and experience of
other auditors in their local area?
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Columns & Rows • Fall 2008 • 12
The Survival and Existence of the Local Chapters (continued)
Remember, the regional and
national organizations do not exist
without the local chapters. So
please do your part and encourage
participation in the local chapters.
Make the local chapters stronger.
Make the regional chapters
stronger. Make the national
organization stronger.
Please go to the NSIPA website,
www.nsipa.org, and find a local
chapter in your area for meeting
times and locations. Also, when
you read this please pass this on
to your auditors and encourage
them to find a local chapter.
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Columns & Rows • Fall 2008 • 13
IAACS, IAASE, IAASW 2008-09 Sponsorship Order Form
Please select your desired level of sponsorship :
3-Star
PREMIUM AUDIT
IAACS/Central Region 2008-2009
 $750
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Consider joining and
gain more exposure!
2-Star
1-Star
 $500
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Sub-Total
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$ ____________
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Total Sponsorship
$ ____________
To see complete sponsorship benefits, visit www.iaa-regions.org and click the Marketplace tab.
Agreement
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refunds will be given prior to or after these services have been completed.
AUTHORIZED REPRESENTATIVE
DATE
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Fax or mail this form, including contact information to: IAA Regions • PO Box 1896 • Columbus, OH 43216-1896
Phone: (614) 221-9828 • Fax: (614) 221-2335 • Email: [email protected]
IAACS, IAASW, and IAASE collect credit card information to make it easier for you to register for dseminars and events online, as well as paying for other services. IAACS,
IAASW, and IAASE do not use or share credit card information for any other purpose. We retain such information as is needed for standard accounting record keeping
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We match your requirements with the best servicing vendor.
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For Additional Information or to Schedule a Consultation
Contact Bob Montgomery (817) 821-0808
[email protected]
• PREMIUM AUDIT Experienced tenure professionals who provide
physical, phone, mail audit services, and access to on-line ordering,
viewing, and reporting capabilities.
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(Inspections) include full underwriting, loss control, and insuranceto-value, risk operation reports, exposures, and proper classifications.
We insure clients partner with the best vendors so they can focus
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“Our two-year association with Montgomery Partners helped us achieve a loss ratio under 40% both years.” ~Mack Avery, Operations Manager, Hallmark General Agency, Inc.
Columns & Rows •
Fall 2008 • 14