Introduction: Workers’ Compensation (WC) insurance costs to the dealership are increasing more than other costs and much faster than inflation. In this newsletter, we explain:
- How WC Insurance Premium is calculated based on payroll
- How manual premium rates are based on risks of the worker, e.g., the office worker has a lower manual rate compared to an auto service technician due to hazards on the job
- How employers with greater injury rates have a higher Experience Modifier (ex-mod)
- How a higher ex-mod results in higher premiums
- How WC rates have climbed over the years
- How Medical Indemnity has more than doubled over 15 years
- How Allocated Loss Adjustment Expense (ALAE) per Indemnity Claim has tripled over 15 years
RECORDABLE: Federal-OSHA requires auto dealers to keep a record of occupational injuries and illnesses using Log of Work-Related Injuries & Illnesses (OSHA Form 300). We discussed this in great detail in our October 2014 Newsletter. We note that first-aid is not recordable on OSHA Log 300. The federal legal definition of first-aid is as follows:
Background: Many dealerships use a subcontractor on premises to wash automobiles and for other operations. Current law regulates the terms and conditions of employment and establishes specified obligations of employer and employees. Dealers can control the liability by having the subcontractor work under a written contract that indemnifies the dealership and also, provide the dealership with General Liability (GL) & Auto Insurance (dealer as additional insured) and Workers’ Compensation (WC) Insurance (with waiver of subrogation and dual employer endorsement). Dealers must maintain arm’s length distance with contractor operations so as to avoid active supervision. Also, liability accrues when the equipment provided by the dealership to the subcontractor, such as forklift or a ladder, is involved in an accident resulting in an injury to the contractor employee.
The National Transport and Motor Vehicle Safety Act of 1966 (15 USC 1381) requires all manufacturers of tires to provide tire registration forms to every distributor and dealer of its tires which offer new tires for sale. The law also unequivocally and unambiguously requires each independent dealer selling new tires to provide tire purchasers at the time of sale with a tire registration form. Further the law requires that before giving the registration form to the tire purchaser, the dealer “shall record in appropriate spaces” information as follows:
- Tire I.D. number of the tire sold/leased.
- Distributor/Dealers name and address or other means of identification known to the tire manufacturer.
Recently, newsletters have been circulating to auto industries highlighting the toxic effects of hexane, a chemical commonly found in brake cleaners. The toxic effects such as peripheral neuropathy (damage to nerves) from exposure to n-hexane have been known for over two decades. The safe exposure limits for hexane specified by governmental agencies has also been 50 ppm for a while.
Investigate Accidents: Save Money & Fight Fraud
A prompt, accurate and thoughtful accident investigation can, simply stated, save money and fight fraud. First, it is state law that mandates that an employer investigate each accident and take corrective measures to prevent repetition of accidents. Secondly, a written investigation report can be reviewed by senior management or the safety committee to undertake steps that would prevent such accidents in the future. Last and not the least, such reports can be useful ammo in fighting the 3F–Fictitious, Fraudulent or Frivolous claims. In summary, as an employer, it is your duty to provide a safe workplace and also to ensure that any worker’s compensation claim is legitimate and preventable in the future.
What’s Up 40%?
You think it’s your energy bills, wish it was your sales, but actually, it is your workers’ compensation insurance! Last year workers’ compensation premiums increased about 40% and this year it is expected to be up 30%. California amended its workers’ compensation law in 1995 to provide a more competitive field for insurance companies, thereby reducing the premiums for employers. In 1995, the law that required employers to pay workers’ compensation insurance was modified to an open rating system from a rate fixed by the state. The 1995 regulations sparked a price war amongst insurance companies much to the delight of employers. However, the premiums that went down about 50% in the year following the deregulation are up about 8% from the pre-deregulation days.
Insurance companies have reportedly increased the premiums to cover up their losses. Last year they lost about $3 billion in California alone. To make matters worse, some of them went belly-up or left the business in the state to minimize their exposure. For example, the second largest writer of workers’ compensation insurance in California, Fremont General Corp., is now under voluntary state supervision for its poor financial condition. Another reason was that when the stock market headed south, many insurance companies that had their fortunes tied up in the market got pummeled.
SCAQMD Rules Limiting Use of Cleaner Aerosols
On October 8, 1999, SCAQMD amended its Rule 1171 to limit aerosols used for cleaning purposes in the shop area to 160 oz.(about 10-11 cans) per day per facility regardless of the facility size. SCAQMD considers cleaners subject to the 160 oz. limit to be any aerosol with more than 50 g/L of volatile organic compounds (VOC’s). By definition, aerosols with less than 50 g/l of VOC are exempt from all provisions of the rule and do not trigger the 160oz. per day limit. And so are 100% acetone based cleaners as acetone is a compliant chemical not subject to VOC requirements.