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Ghost Policy When An Accident Occurs – Ouch!


When A Ghost Policy Becomes Scary  – Accident Occurrence  = Bad Day

J&L Risk Management Consultants receives an inquiry on locating an agent that will write a ghost policy at least monthly.   As we are not insurance agents, we refer the caller or emailer to a number of local agents – with two caveats.  The two warnings are:

  1. If an accident occurs and an uninsured subcontractor is ruled an employee by a Workers’ Compensation Judge (Commissioner), the ghost policy insurance carrier may deny the claim ;
  2. or the policy that was not considered to have enough premium for a physical audit is now up for audit with an accident hanging over the audit.


A policy and audit that covers #2 above sits right in front of me now on my laptop screen.  The premium auditor assessed approximately $123,000 in premiums on a ghost policy.

Some states consider a ghost policy illegal which takes the policy from a civil matter to a possible referral to criminal court.

My First Exposure in 2001

The first time I had to deal with a ghost policy was when a supposedly insured subcontractor was performing work for a school system.  A tree service company subcontractor had fallen from a tree and was seriously injured.  The tree service owner had shown a Certificate of Insurance to the school system that looked very legitimate except the cert covered no employees or subcontractors.

The insurance carrier had denied the claim.  The school system contacted me soon after the accident occurred – if they had only taken a few minutes to call the carrier or agent listed on the cert.   No one was tasked with calling the carrier or agent. 

I called the agent and carrier – even worse the policy had been cancelled due to lack of payment before the accident.  The school system was self-insured for workers’ compensation – double ouch as there were no carriers involved that could have provided coverage.    Public school Risk Managers are now much more careful when using subcontractors.

Ghost Policy – Why Attempt It?

According to Leaf and Limb, 

Large variations in price quotes from different tree service companies are often due to one factor: workers’ compensation insurance. Just because a tree service provides a certificate of insurance showing proof of coverage does not mean it actually has real protection for its employees.

Is a ghost policy based on profit motives? 

By obtaining a Ghost Policy, a tree service is able to produce a certificate of insurance while saving anywhere from $30,000 to well over $300,000 per year depending on the size of the company.

pic of dogs workers comp ghost policy
Creative Commons – AglampetGruodje




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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