The conditions enumerated in a workers’ compensation policy define rights and obligations to the parties. They outline governance of the day to day relationship between a carrier and an insured.
Typical conditions include:
- Inspections. The insured must allow inspections of premises and operations so the insurance company can assess safety and loss control concerns.
- The insured cannot transfer rights or duties to a third party without written consent from the insurance provider. For example, in the case of a merger of two companies, the selling company cannot assign coverage to the buying company, or transfer a favorable experience modification.
- The first named insured is solely responsible for all insured parties concerning premium payment, communications such as cancellations, refunds, or additional audits.
- Policies are considered as one year terms for administrative purposes. Premium rates, modifications or any administrative concern is handled as though the term were one year. Three year policies are fairly rare in the modern era of workers’ compensation. Fixed rate three-year policies have a modifying clause to eliminate this condition. Three-year retrospective plans are calculated on an annual basis, and as such, have lost their appeal to potential buyers.
- Cancellation. Policies can be cancelled, for example non-payment of premium, under conditions outlined by the state authority. Usually, the cancellation condition includes a front end period, like two months, for the insurance company to decline the risk. The carrier usually must cancel at least some minimum time prior to renewal or the policy automatically renews. Of course, non-payment has a statutory warning and time to correct.
These conditions are important to understand and honor. They protect the insured and the carrier so the governance of the policy is smooth. Typically, conditions establish a mutual respect between the insured and carrier. The right to inspect but the obligation to report back, and offer advice. Mutually beneficial management.
