# workers comp audit problem



## sccontractor (Feb 25, 2010)

Just had a workers comp audit. Found out that one of my sub's workers comp policy was cancelled eariler in the year. Now I'm facing paying 5k to cover where I paid him for jobs. With this recession going on I have no work and no funds. What happens if I can't pay the amount that I am going to owe my insurance? I know I will get cancelled but can they sue, ruin my credit, put a lien on me? Has anyone had a similar problem?


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## griz (Nov 26, 2009)

sccontractor said:


> Just had a workers comp audit. Found out that one of my sub's workers comp policy was cancelled eariler in the year. Now I'm facing paying 5k to cover where I paid him for jobs. With this recession going on I have no work and no funds. What happens if I can't pay the amount that I am going to owe my insurance? I know I will get cancelled but can they sue, ruin my credit, put a lien on me? Has anyone had a similar problem?


How about an introduction, tell us where you are and what you do:thumbsup:

And YES to all the above. Work Comp is like the IRS they are ruthless. Call your rep and talk with them. What ever you do don't put your head in the sand and pretend this will go away. *KEEP NOTES* of all conversations,who you spoke with & what time & date, dates correspondence sent & received etc. Send all correspondence via registered mail. Explain your situation & that you want to remain in good standing. Good luck:thumbsup:


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## sccontractor (Feb 25, 2010)

*workers comp audit problems*

thanks for the info. I just found out today, so I haven't done anything yet. I'm just a small contracting company in sc. I do decks, home repairs, doors, windows, etc. I do most of the work myself so I only hire a few subs a year. I appreciate the advice!


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## Rio (Oct 13, 2009)

Talk to them, explain what happened and maybe see about making monthly payments...............


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## Mellison (Aug 3, 2008)

Good luck.
They may allow you to make payments. However, they may still be quite large.
I now buy my WC through my payroll company. It's the best decision I made since I started my business over 15 years ago.
This may not have helped with your situation, but it is something to think about.


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## ABKY (Aug 27, 2009)

Sorry to hear that man. Im a small timer too and from now on get a new copy every couple of months. Did his certificate say it was good for a year? I have to pay mine all at once which never lets you get by without having it. Make sure you give your sub a raking for doing that to you!


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## Warren (Feb 19, 2005)

sccontractor said:


> thanks for the info. I just found out today, so I haven't done anything yet. I'm just a small contracting company in sc. I do decks, home repairs, doors, windows, etc. I do most of the work myself so I only hire a few subs a year. I appreciate the advice!


I am a little puzzled here. A small remodeling company that does most of their own work, and only hires a few subs, is gonna owe 5k in WC because ONE sub canceled their policy?? What was the total amount of work that this sub performed? I would imagine you would only be liable for a percentage of the total paid to him. Only way its gonna be 5 grand is if you payed out like 50 or so. It all depends on which trade this sub performed. I love these newbie threads where you have to read between the lines.


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## festerized (May 19, 2007)

WC is usually 30% of amount paid to sub.
If sub does not have WC the contractor must pay his subs 30% plus another 30% for the following year.
This extra 30% will be credited to your account the following audit


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## Warren (Feb 19, 2005)

festerized said:


> WC is usually 30% of amount paid to sub.
> If sub does not have WC the contractor must pay his subs 30% plus another 30% for the following year.
> This extra 30% will be credited to your account the following audit


Dave, I am sure it varies state to state. Here in Ohio we have different rates for different professions. The more risk the higher the rate. Almost half of all businesses purchase their WC through groups to get better rates. 5 years ago when I first started our rate was almost 20%. Now through safe practices and group rating, our rate is about 4%. In New Jersey does every profession pay the same rate??


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## festerized (May 19, 2007)

It varies from profession to profession
Trim carpenters pay around 7%?
I pay 37% because I cover everything. All it takes is one accident and your nor properly covered to put you out of business. I worked as a sub framing contractor years ago for a guy who had the wrong WC for his contracting company. Long story short, guy fell a ladder and broke his back, Contractor’s WC didn’t fully cover the medical and contractor had to pay the difference and fines for not having proper coverage. Guess where contractor is now?


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## Framer53 (Feb 23, 2008)

David, if that man was honest with the agent that sold him the policy, he would have claim against that agent.
WC varies a lot by state. Here in NY if you have a policy, they have to cover a worker with you owning more or less at the audit.


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## festerized (May 19, 2007)

He knew his coverage was incorrect; He took a gamble to save some money and lost it all in the end.
May that be a warning for any of you guys that are trying to save a few bucks.


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## Mrmac204 (Dec 27, 2006)

holy cow, those rates are big. I am paying 3.19% - I've had no claims though.(finishing carp)


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## CYB (Feb 24, 2007)

sccontractor said:


> Just had a workers comp audit. Found out that one of my sub's workers comp policy was cancelled eariler in the year. Now I'm facing paying 5k to cover where I paid him for jobs. With this recession going on I have no work and no funds. What happens if I can't pay the amount that I am going to owe my insurance? I know I will get cancelled but can they sue, ruin my credit, put a lien on me? Has anyone had a similar problem?


 
Due to screw-ups on our self reporting we got dinged for a little over $3000 on our last wc audit. We arranged to pay it in four $800/month installments.


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## sccontractor (Feb 25, 2010)

Thanks for all the input from everyone. Hopefully they will let me make payments. I've certainly learned to check with the insurance company every month or two now. And Warrren, it doesn't take long at 20% to reach 5k. I thought I had a good sub. Paid him 25k for 9 jobs. Thought my little business was going to grow. Now I'm gonna be out $$ and back to looking for good subs. Guess I'll just stick with jobs I can do myself. Live and learn!


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## Warren (Feb 19, 2005)

Well if nothing else I would check to see how long his coverage was in effect for. You said it lapsed earlier in the year. find out the exact date and then you will be able to reduce the amount by a little hopefully. Being in business is tough. This is a good example of why it is so important to check everything. Many craigslisters will tell you that they are licensed, bonded, insured also. Yeah I bet!! Its also very important when sarting a business to have adequate capital set aside to deal with emergencies and unforseens. 5k seems like a small amount to put you under.


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## ABKY (Aug 27, 2009)

Sorry Warren, but with the year I just had, and the weather for the last 6 weeks, 5k would bury me. I can see where he's coming from:sad:


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## red_cedar (Mar 30, 2005)

If you dont or cannot pay you may not be able to get coverage from anyone later.
A good point was brought about the time the policy cancelled. It may cover a portion of the time in question.
Another good point was the next policy period, having to come up with more money to start up with the previous year exposure.

Start saving up


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## Sir Mixalot (Jan 6, 2008)

sccontractor said:


> Thanks for all the input from everyone. Hopefully they will let me make payments. I've certainly learned to check with the insurance company every month or two now. And Warrren, it doesn't take long at 20% to reach 5k. I thought I had a good sub. Paid him 25k for 9 jobs. Thought my little business was going to grow. Now I'm gonna be out $$ and back to looking for good subs. Guess I'll just stick with jobs I can do myself. Live and learn!


Yeah that sucks.:yawn: 
Just be glad none of his guy's got hurt. :w00t:


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