Policing the Integrity of Workers’ Comp Insurance

Q: Is your company’s Workers’ Compensation insurance legitimate? In New York, Workers Compensation, also known as Workers’ Comp, is mandated insurance taken out by employers to cover the medical and lost wages claims of employees who are injured on the job. In general, it was designed to eliminate lawsuits against employers by injured workers, and also to streamline the employee’s access to medical care and ease the financial burden that lost wages would place on the injured worker and his or her family during their treatment and recovery period. Any injured worker is entitled to workers comp–even those who are illegal immigrants, “off-the-books” workers, and even those whose employers don’t carry workers’ comp insurance. In the latter case, a worker can either sue their employer or collect from a workers’ comp pool fund designed to protect workers from their uninsured employers (and the workers’ comp organization that paid out will then seek to recover from the employer who failed to purchase the mandated insurance). Particularly in a rough economic climate, employers often feel squeezed by the rising costs of both mandatory and discretionary employee benefits programs. It’s no surprise employers may seek the least expensive options for these benefits. Unfortunately, not all policies may be what they seem. On September 9, 2016, Breakaway Courier Corp., a bicycle courier company, sued Berkshire Hathaway, Inc. in Manhattan Supreme Court, accusing it of “siphoning premiums” paid on workers’ comp insurance policies to unlicensed, out-of-state insurers by funneling the premiums through illegal shell companies. Without a license, you are prohibited from collecting insurance premiums. In addition, Breakaway believed it was buying an affordable, profit sharing- based workers’ comp insurance policy that would reward it if its claims for loss were low. Instead, the company claims it actually purchased a misleadingly-labeled reinsurance policy that was not only costly, but was allegedly part of a “reverse Ponzi scheme” that required Breakaway to cover the losses of other companies–a position of great financial risk to the unsuspecting courier company. Plaintiffs deny any wrongdoing. In addition to $18M in damages, the Manhattan suit seeks to have the reinsurance participation agreements declared void and against public policy. Some similar workers’ comp policies have been banned in other states. In addition to protecting their injured employees, allegations like those leveled by Breakaway are a reminder for employers to protect themselves as well when purchasing workers’ comp policies. Have any questions regarding Workers’ Compensation? Contact Jaroslawicz & Jaros at , or toll free in New York , or online here. The initial consultation is free of charge.