Home Builders and Agents behind Coverage Alert System

Workcompcentral.com
By Michael Whiteley, Eastern Bureau Chief

The Home Builders Association of South Carolina and a Columbia, S.C.,
insurance agency that specializes in the construction industry are jointly
funding a new system that alerts users when a workers' compensation policy
has lapsed prior to its scheduled expiration date.

The system was first proposed six years ago by Frank B. Norris Co., a
Columbia, S.C.-based insurance agency and picked up the support of the home
builders' group last year. It launched Nov. 15 on the website of the South
Carolina Workers' Compensation Commission.

The system lets users know of mid-term lapses in coverage − usually a day
after a policy is canceled. South Carolina Gov. Nikki Haley approved the
system this summer for a trial run.

Gary Cannon, the commission's executive director, said on Monday the system
is geared toward general contractors who risk liability when a
subcontractor's employee gets hurt on the job.

A provision of South Carolina workers' compensation law, known as the
"up-the-ladder" law, makes general contractors responsible when workers are
hurt on a job site and their employers are uninsured.

Cannon said the state's general contractors have been left holding the bag
by subcontractors who present certificates of insurance to obtain work and
then fail to make premium payments on those policies.

"We don't have numbers, but there is anecdotal evidence that this is going
on," Cannon said.

Julian Barton, director of government affairs for the Home Builders
Association, said a lawsuit filed by an uninsured subcontractor who fell
from a scaffold several years ago helped fuel the push for the system.

The Home Builders and construction companies whose business is handled by
Norris and Co. agreed to pay the estimated $10,000 in start-up costs.

"Just because someone tells you they have insurance and present a
certificate today doesn't mean they have insurance tomorrow or down the
road," Barton said.

"It took over a year to actually get it up and running, and we don't know
how effective it's going to be," Barton said. "But, if it catches five
people who are working without insurance, then that's five subcontractors
that won't be having injuries that a general contractor is going to have to
pay off on."

Frank Norris, owner of the insurance agency, said he came up with the idea
six years ago while viewing a presentation on the commission's
proof-of-coverage database, which allows users to check online for
employers' coverage.

"Some of our clients had people working pretty much full time just verifying
that subcontractors' compensation coverage was still in force," Norris said.
"And we've seen plenty of cases in which a subcontractor's employee gets
hurt and the general contractor ends up paying. The only people who will get
hurt by this are those who are trying to hurt the system."

Users, who can sign up for the system free-of-charge, can query a company by
name or insurance certificate number. They then supply an email address and
request an email alert – by company name – for any mid-term lapse in
coverage.

Norris said cancellation information is uploaded daily to the commission's
database by the National Council on Compensation Insurance. The system scans
the data, checks for matches with the database of users and sends out the
alerts.

Norris says the system does not send out alerts on policies that have
reached their expiration dates.

"Our clients can monitor those policies for expiration dates and then go
online to verify that coverage is still in force," Norris said.

The system advises users that the South Carolina Code of Laws 42-1-400 and
42-1-410 make general contractors liable for worker injury costs incurred by
subcontractors.

G. Frank Sheppard, president of the Independent Insurance Agents & Brokers
of South Carolina, said he's not aware of any similar alert system in use
around the nation. He said he is encouraging member agents to begin using
the system.

"Like any other state, we've had problems with certificates of insurance and
policy lapses," Sheppard said. "It's better than a paper system."

The new system also has the support of the South Carolina Small Business
Chamber of Commerce. Frank Knapp, president of the chamber, said the only
businesses negatively impacted by the system will be those that aren't
playing by the rules.

"It's really unfair when a subcontractor abuses the workers' compensation
system. That has a negative impact on all contractors because of the way the
South Carolina law is written," Knapp said.

Although the system is intended to check on subcontractors, it allows anyone
to sign up for the email alerts and request lapses in coverage by any South
Carolina employer.