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Workers Comp Premium Audit Dispute Delay Can Be Very Costly


Premium Audit Dispute Delay Costs Company $500,000 – Ouch!

Over the last 13 years that I have been writing articles for the J&L website, I have warned very heavily against any type of premium audit dispute delay.   Delaying a dispute of or ignoring a bill from your current or prior carrier often turns into money lost from your company’s budget.

vector alarm clock ringing premium audit dispute delay

OK, you or your company may not agree with the workers comp premium audit.  Many times, your company must act quickly regardless of the circumstances.

This website and I provided many articles on this very subject.  Why?  Because I see the leftover problems once a company contacts J&L too late in the premium audit dispute process.

By the way, thanks to William Rabb and the folks over at WorkCompCentral for providing me with the location of the ruling on a major premium dispute delay.  I cannot point you directly to the article as it is behind a paywall.

The lawsuit can be found here.  I will not name any of the parties involved in the lawsuit.  I recommend you take a few minutes to read over the decision.

In the proverbial nutshell, this is what happened:

  1. A company separates from its parent company
  2. The company then requests a policy from a carrier
  3. The rating bureau (WCIRB) gives the new company a higher X-Mod than the parent company.
  4. The carrier provides the company with an endorsement on the higher X-Mod
  5. The company thought the X-Mod should have been from the parent company
  6. At the premium audit, the company is charged with the higher Mod which sharply increases the premium.
  7. The carrier sends out the premium audit bill.
  8. The company does not think they should pay it due to verbal guarantees.
  9. The company does not file a response to the collection lawsuit timely.
  10. District Court and Appellate Court says Pay Up.

Experience Modification and not Premium Audit Dispute Delay?

I will not cover the Ownership Rules or what happened when the companies split.  I do not have that information and will not attempt to assess what happened in that part of the dispute.

If your company disagrees with an Experience Modifier decision by the Workers Comp rating bureau including WCIRB, here are the time rules right out of the manual –  (Note there are some exceptions to the below rules – these are the GENERAL Rules from their ERP Manual:

In the event of the discovery of an error in the current experience modification or the two immediately preceding experience modifications, a revised experience modification shall be published and be effective as follows:

a. The revised experience modification shall be effective as of the effective date of the erroneous experience modification, provided:

(1) The revised experience modification is less than the erroneous experience modification;

(2) The revised experience modification is published within three (3) months of the effective date or publication date of the erroneous experience modification;

(3) The WCIRB was notified, in writing, within three (3) months of the effective date or publication date of the erroneous experience modification of a possible error; or

(4) The WCIRB notified the carrier of record, in writing, within three (3) months of the effective date or publication date of the erroneous experience modification that the erroneous experience modification was under review.

b. Except as provided in paragraph a, the revised experience modification shall be effective as of the date it is published provided, however, that the revised experience modification shall not be applied if it is published three (3) months or less prior to its expiration.

The above timetable represents very distinct periods of time on the X-Mod changes after a policy goes into effect.

Endorsements Can Completely Change Aspects of Any Policy

Any changes to a policy once issued is accomplished by Endorsements.  I have written or spoke on Endorsement many times.  The endorsement letters from the insurance carrier may be more important than the policy itself.   Check out this article on Endorsements.  I have written at least seven articles on Endorsements.

I have seen up to 75 endorsements on a large company’s workers comp policy.

Insurance Carriers Now Using Collection Agencies – with different response timetables

Once an insurance carrier turns over a premium audit bill to collections, a new timetable, besides any of the insurance timetables, kicks in and must be handled properly.

Knowing your local collection rules/laws may be helpful.  The best tactic to use is responding ASAP to any collection notice in writing with Certified Return Receipt.

We often hear from policyholders with a premium audit bill after the collection agency contacts them.   Please refer to this article on collection agencies.

No matter if a policy generates a premium audit dispute or an Experience Mod dispute, the clock is ticking.

Also Read: Policy Dispute Time Limit – 36 Months Maximum

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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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