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Workers Comp Ladder of Insurance Very Important Term in 2020


Workers Comp Ladder of Insurance – Subs of Subs Become Employees

Early in my career, my insurance company employer sent me to what was a whirlwind of legal terms and concepts known as subrogation.   I took notes until my arm cramped with pain as I know this was important information.  The notebook full of notes became two terms that I coined and copyrighted the Ladder of Insurance (c) and Workers Comp Ladder of Insurance (c).

picture workers comp ladder of insurance
Wikimedia Commons – Armando

The two terms seem similar.  They are very similar in some respects but differ in others.    I had originally coined the Decision Tree of Insurance Liabilities (c).  That term sounded too convoluted.   Let us look at the Work Comp term now.

Ghost Policies Become Lessons for Micro Companies

A phone call came in two days ago.  Many times,  J&L is mistaken for an insurance agency.  We are not agents.   We receive these calls more often now that entrepreneurs.  The caller – a painting company – requested a policy where the owner is the only person insured under the policy and then he would be excepted out as owner.

These are called ghost policies.  Some states have outlawed their use.   We receive at least 30 calls a year from company owners that have these types of policies.

One of two incidents have occurred – either (or both):

  1. An uninsured subcontractor was injured
  2. The insurance carrier performed an audit and wants premium for the uninsured subcontractors.


Let us center in on #1 of the two.   By the way, how prevalent is this situation?  Check out this older article that pointed out 30,000+ companies with no workers comp insurance operating in North Carolina 10 years ago.  (Yes, 30,000)

Workers Comp Ladder of Insurance and The Court Systems

The ladder workers comp ladder of insurance of life
Wikimedia Commons – Mykl Roventine

The Workers Comp Ladder of Insurance or Ladder of Insurance points to one opinion that should be considered a fact.  A Workers Comp  Judge, (Commissioner) or Court of Appeals usually will go up the Ladder of Insurance to see if there are any insurance coverages available to an injured contractor or employee.

Self-insured should take notice of this concept – self-insurance counts as a policy of insurance.

This is Risk Management – not legal advice.  The risk of a subcontractor of a subcontractor or a subcontractor being an employee becomes a real risk – even if you thought or were told that the subcontractor was insured.

Certs Become Critical – Yet May Be Worthless

FEMA contractor workers comp ladder of insurance to install a water
Wikimedia Commons – Amanda Bicknell

Certs or Certificates of Insurance show who is insured by which insurance carrier.   We had a client where this situation occurred – the main contractor was given a cert by the subcontractor that was canceled after the contractor/subcontractor contract was signed.

The subcontractor even supplied a valid subcontract attached to the contract.   An injury had occurred, and the injured subcontractor’s subcontractor filed a claim with the client’s carrier.

The carrier denied the claim originally – the Workers Comp Commission ruled the client’s carrier owed benefits, so now the carrier requested premium to cover all the client’s subcontractors – even for the ones with valid certificates of insurance.

The easiest way to avoid this situation can be found at the previous Certificates of Insurance link above.


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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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