1-16-12; Word to the Wise—Don’t Be Uninsured for WC in Illinois!! The risks have become impossibly high

This week, we were contacted by a reader who inquired about a claim where an individual suffered a severe, disabling injury. Our reader indicated the injured claimant was being treated as an “independent contractor” primarily due to the fact they were paying the injured person in cash, not deducting payroll taxes and issuing 1099’s to report the income to IRS. Turns out the injured person wasn’t going along with the independent contractor status and was filing a WC claim.

We asked who owned the trucks and equipment causing injury—our reader’s company did. We asked who paid for expenses to operate the truck and equipment—our reader’s company did. We further asked who gave the injured person their work assignments and monitored completion, our reader’s company did.

One easy rule in dealing with Independent Contractors who provide services for you—they have to have their own WC coverage or they aren’t “independent”

Our advice—if you want someone who performs services for your company or business organization to be “independent” from the perspective of workers’ compensation insurance and coverage, they have to have their own WC insurance for every second they are in your service. If they don’t, in our view, they are “dependent contractors” and you are going to put yourself and your company in a very hot spot not to force them to have WC insurance at either their cost or you cost.

In our view, every other concept or device by which you characterize workers as “independent” is certain to fail if a worker is serious injured or killed and needs thousands in WC benefits and doesn’t get them. If there is a widow(er) with kids that aren’t getting fed, good luck with using the “independent contractor” defense if you worked with the decedent and they didn’t have coverage in this state.

To avoid the hot spot, get proof of WC insurance from every person or company that performs services for your organization that isn’t covered by your own WC policy. If you don’t get proof, don’t let them in or on your plant or offices. Don’t let them operate your equipment or vehicles.

What if they give me a phony certificate of insurance?

Well, the folks that run our system thought of that one—it is a crime. Right now, on the IWCC website, go to the right side of the main page and look for WC Insurance Fraud--you can navigate to this status report:

Case Number: 07CF4026

Case Name: The People of the State of Illinois v. Reuben Collier

County: Lake

Conviction Date: 6/4/09

IWCC Number: None

Offense: One count of Workers' Compensation Fraud pursuant to 820 ILCS 305/25.5(a)(4) (intentionally prepare or provide an invalid, false, or counterfeit certificate of insurance as proof of workers' compensation insurance), a Class 4 felony; two counts of Theft pursuant 720 ILCS 5/16-1(a)(2)(A) (knowingly obtains by deception control over property of the owner), a class 3 felony; and one count of Forgery pursuant to 720 ILCS 5/17-3(a)(2) (knowingly issues or delivers such document knowing it to have been thus made or altered), a Class 3 felony.

Sentence: The defendant was sentenced to 30 months of probation, 2 months periodic imprisonment and 10 months electronic home monitoring, assessed monthly probation fees of $25, a random testing fee of $125 and ordered to pay restitution of $97,236.

Summary: The insurance agent defendant kept payments from clients intended for workers' compensation insurance, and issued fraudulent certificates of insurance.

There are others. If someone issues a phony certificate of insurance, in this state, they are in lots of trouble. If your organization received a phony certificate, the Commission and possibly the Attorney General’s office are going to be all over you and whoever issued the bad paper. Work like the dickens to avoid the litigation and uncertainty.

What is the ‘Hot Spot’ for Companies Operating in IL without WC coverage?

Well, right now, the Illinois WC system is ready, willing and able to do a bunch of difficult and permanent things to businesses and execs that don’t get the message. They can:

·         Close your business immediately and possibly forever;

·         Close other businesses who work with your business or any businesses on a work site where one business doesn’t have IL WC coverage;

·         Write hefty “traffic tickets” for not having WC coverage;

·         “Pierce the corporate veil” to go after personal assets including the homes and autos of company owners who operate businesses without WC coverage;

·         Fine you $500 per day for each day you operated a business without WC coverage, even if you go out and buy coverage that day;

·         Start criminal proceedings and possibly jail folks who operate businesses without WC coverage.

If you need help locating an IL WC/GL or EPLI insurance broker, KC&A works with top-notch brokers for local, regional and national companies with Illinois operations—just send us a reply and we will forward your inquiry to a broker who will cover your needs.