Construction Safety & Workers Compensation Insurance Challenges and Solutions

Safety and workers comp insurance have several challenges, but what are the best solutions? Stephen brings his insight to this week’s episode. Here’s what you need to know about what Workers Comp can do for you, the most common type of claims, when to file a claim, experience mods, and more.

Topics we cover in this episode include:

  • What Workers Comp is and how it started
  • How experience mods work for workers compensation
  • Use your workers comp carrier for good loss control services
  • When to file a workers compensation claim 
  • Workers comp and crossing state lines
  • Which accidents account for the highest number of workers comp claims


Join the conversation on our LinkedIn page:

Wade Carpenter, CPA, CGMA |
Stephen Brown, Bonding Expert |


[00:00:00] Wade Carpenter: Safety and workers comp insurance have several challenges, but what are the best solutions? Stephen is here and he’s going to give us some great insights today. Come on in, let’s talk about it. This is the Contractor Success Forum. If you’re new here, I’m Wade Carpenter with Carpenter Company CPAs.

With me is my co host Stephen Brown with McDaniel Whitley Bonding and Insurance. Stephen, this is a topic you wanted to tackle today. Initial thoughts on starting us off.

[00:00:30] Stephen Brown: The first thing I wanted to do, Wade, is talk about what Workers Comp can do for you as a construction company owner, how it all got started, and just a little bit of things I think our listeners need to know about Workers Comp. Everything from claims, when to file a claim, to experience mods. And most importantly, what I wanted to get out to everyone is the number one type of claims that we’re seeing now that produces the highest amount of dollars.

[00:00:57] Wade Carpenter: One of the questions I get all the time is, do I need workers comp? And everybody seems to want to avoid it as long as they possibly can, but is it state by state?

[00:01:08] Stephen Brown: If you’re in the construction business, you have to have workers comp. In Tennessee, for example, if you’re a contractor, you’ve got to have workers comp. So you say well, you know, I can 1099 my subs and keep this down and still get a comp policy and keep my premiums low, but there’s a lot to track to go into as a contractor with workers comp.

I guess if we wanted to talk about shortcuts that you can take as a contractor to minimize workers comp costs, maybe that’s another issue.

But right now I just wanted to talk a little bit about what it is.

What’s the worst type of claims, how to save money on workers comp, and when to file a claim. How about that?

[00:01:48] Wade Carpenter: That sounds great. I think always they want to hear about saving money and it’s not their favorite thing to talk about because it can be very expensive.

[00:01:56] Stephen Brown: It is. And I’ll never forget once I had a, an electrical contractor, and I guess this was about 30 years ago. And I had him rated up as for interior wiring classification. And back then it was like a $8 rate per $100 of payroll. It’s not that much now, but back then it was. And all of their payroll was either clerical or interior wiring of a building.

And one morning I got up for breakfast, got the paper off the front porch and went to get my coffee and sit down at the breakfast table and there he was on the front page hanging from ropes and changing the light bulbs on the Memphis Bridge.

[00:02:37] Wade Carpenter: Oh.

[00:02:37] Stephen Brown: That was one thing that was terrifying. I didn’t know about that, but the worst thing was that the insurance underwriter was here in Memphis and she happened to be looking at the paper about the same time I was.

And I got a call immediately on my home phone. Are you looking at the paper? You say, okay why didn’t they just put it under electrical wiring for bridge? Because it was the same classification back then that would go under bridge painting. And the rate for bridge painting was $140 per $100 of payroll.

[00:03:07] Wade Carpenter: Oh.

[00:03:08] Stephen Brown: Yeah.

Anyway, the good news is that in that article, my contractor also mentioned that they had developed a foolproof system for rigging up ropes so their employees couldn’t possibly fall. That was a wonderful disclaimer in there.

Needless to say, their insurance was canceled immediately. But at McDaniel Whitley Insurance and Bonding, all we handle is contractors, Wade. And over the years, we’ve seen lots of crazy claims. We’ve seen frustrating claims. We’ve seen expensive claims. And unfortunately, we’ve seen death claims.

What Workers Comp is and how it started

[00:03:40] Stephen Brown: And Workers Comp started back really officially in 1948. And the reason was is because too many workers were having to get attorneys to, sue their employees for injuries that their employee was negligently responsible for.

And Workers Comp was a way to work something out for the contractors and the employees that took all of that risk and separated it. Now, you had to pay for it, but before that, a lot of the contractor’s money and time was tied up in employee related lawsuits. So Workers Comp covers unlimited medical costs to get your worker back on their feet working.

And it also covers disability claims, depending on the type of disability it pays an amount for that, and and it pays for death claims. Unfortunately, I’ve had those over the years, and I can tell you they’re traumatic. But workers comp is something that is not just a necessary evil. What comes along with workers comp from my standpoint, are the loss control resources that come with making sure your workers don’t get hurt.

[00:04:54] Wade Carpenter: Right.

I know I hear a lot of people, obviously it’s expensive, as we said, and they go and get these so called ghost policies, and then something happens, and I don’t know if you’ve got any stories about that. I always love hearing your stories. But I could see that particular electrical contractor you’re talking about, they fell off hanging from their foolproof rope system.

Do you pay a claim like that?

[00:05:18] Stephen Brown: Yeah, their policy was canceled immediately.

And back then workers comp wasn’t as easy to get. And, the NCCI reported that they had misclassified payroll. So it was hard to get it replaced. So there’s a lot of repercussions to not classifying things right. But let’s not talk about that.

At McDaniel Whitley , we want customers that understand they’ve got to pay workers comp, and they need someone to help guide them in the proper classification so they’re not paying too much. They need us to help them with audits to make sure when something’s picked up incorrectly, we can dispute it and get it corrected. And they need our help with loss control.

How experience mods work for workers compensation

[00:05:56] Stephen Brown: A lot of my contractors work for different companies or the federal government and they’re looking at those experience mods. The Experience mod for a new construction company is 1.00. If you don’t have claims, your experience mod goes down, and I’ve seen them as low as a .59. That means you’re paying literally 41 percent less for your workers comp premium than a new company starting out.

Keeping claims down makes your mod go down and you pay less. But most importantly, Wade, it keeps you from losing money on a job due to an employee getting injured. Someone gets hurt, somebody has to take them to the hospital. Then you’ve got two people’s worth of lost productivity on the job. And then you have your experience mod going up.

Use your workers comp carrier for good loss control services

[00:06:43] Stephen Brown: So best thing, use your workers comp carrier for good loss control services. A lot of contractors don’t do it, Wade. They figure they’re going to be rated up and judged, and their costs are going to go up. And that’s not the case. They might cancel you if they have a lot of serious recommendations that you’re not following.

But if they’re ridiculous recommendations, your agent should be able to handle that for you.

When to file a workers compensation claim

[00:07:06] Wade Carpenter: Okay, I guess that probably does bring up a question that I think you brought up before. When do you file a claim? A lot of times I’ve seen contractors pay some claims or at least, try to send the worker to the doctor on their dime and so that their workers comp. When should you file a claim?

[00:07:23] Stephen Brown: You have to file a claim every time a worker gets hurt. That’s the law. But you can file a claim for reporting purposes only. And that way, the workers comp carrier understands something has happened. And then they can follow up to see whether to close it out or not.

The reason you might want to pay for small claims instead of turning them into workers comp is in order for it not to affect your experience mod.

I have contractors that work for certain companies and if their experience mod goes over a one, some of them over a .90, They won’t let you work in their plant. So it’s serious business.

Workers comp and crossing state lines

[00:07:59] Wade Carpenter: Another thing that I see too is, when people are crossing state lines and things like that, I’ve seen some contractors just assume that they’re still covered. Are they still covered? What are the considerations if you cross state lines?

[00:08:12] Stephen Brown: We get that question a lot.

If you’re a national company, you’ve got employees in every state, for example. Your employees are classified of where they’re located, if you have different branch offices. But if you’re located in Memphis, Tennessee, your headquarters are. And your employees report to work in Memphis, Tennessee, or they may go directly– in Memphis, we’re right here at the corner of Mississippi and Arkansas. Right smack dab in the corner.

It’s where the business is domiciled. Sometimes someone will be hired for a job and they’ll try to file benefits under the state where they live because It pays more in the state where the construction company is located.

So, It’s important to always ask your agent. Let them know what state you’re operating in so they can be listed on the workers comp policy. And that way you’re covered both ways.

[00:09:05] Wade Carpenter: Gotcha. So I guess a follow up question to that, if your contractor is in Memphis there in Tennessee and you go over and do a job that’s in Arkansas, are you covered for that? Or do–

[00:09:18] Stephen Brown: Yeah, it would be Tennessee benefits would pay for that.

Luckily, where we’re located, all the state benefits are roughly the same. But there’s other states that have more benefits. If you’re working over a navigable body of water, Wade, you have to have what’s called USLNH endorsement on your workers comp policy. Because that’s a whole nother set of claims that you can have related to federal laws of working in or around navigable bodies of water.

It’s just best to let your agent know where you’re working and make sure you’re going to be covered in that state.

[00:09:53] Wade Carpenter: I know between here in Georgia, and then I’ve got contractors that do electrical in Florida. And there’s a huge difference between the rates of electrical in Florida than they are here. That’s just one I hear about all the time.

So if my contractor sends somebody down to Florida, they’re still covered under the Georgia rates?

[00:10:13] Stephen Brown: That’s correct, yes.

Now, it used to be Florida workers comp was so high that the state labor board required you to show proof that you have a Florida workers comp policy. Because people were coming down from Georgia, say, and hiring local subs with no insurance and running their insurance through Georgia comp policy. So that was a huge issue.

So again, I say, you ask your agent. I’m working in Florida. I’m taking my employees to work down there. Do I need to add Florida to my workers comp policy? Do I need to get a separate workers comp policy in Florida if I can’t add it? And why? What’s the difference?

So again that’s an agent question and I can never know what’s on your workers comp policy. The cover page of your workers comp policy is called a declaration page. And it shows how much coverage you have when it’s effective. It has your NCCI, National Council on Compensation Insurance rate number. And it has what states that you are listed.

In the old days, you would put an all states endorsement that would just cover every state and not worry about it. Now the comp carriers don’t let you do that anymore.

Some workers comp carriers are regional carriers that don’t operate in other states because it’s so difficult to do business in those states.

[00:11:40] Wade Carpenter: Yep..

[00:11:41] Stephen Brown: They see that the benefits are too high. and there’s not enough laws to protect them from an unreasonable type of lawsuit.

In the states that most carriers like to operate, for example, in Tennessee, the rates are low because the laws are good. There’s great drug testing in place where claims can be denied. What you can pay for workers comp and not pay for workers comp is tightly tied down, so rates are less.

So I didn’t mean to put you to sleep with all that, Wade. But I did want to end our customers knowing that workers comp, unlike other insurance type of coverages, lets you as a contractor break out your payroll by classification of what your employee does. So you can say my guy might do framing one day and electrical wiring the next day.

Well, you know, I didn’t hear that. I didn’t see that. You need to pick a classification of what they do most of the time and call them that.

Either that, or you have to track the payroll of when they’re doing framing and when they’re doing electrical.

[00:12:47] Wade Carpenter: Right.

[00:12:48] Stephen Brown: Nobody does that. If you’re fairly–

[00:12:50] Wade Carpenter: A couple of them we do that for internally for our contractors, but.

[00:12:54] Stephen Brown: Yeah, well then, hire Carpenter & Company CPAs and do it. Would be a great recommendation from me.

Which accidents account for the highest number of workers comp claims

[00:13:00] Stephen Brown: What I wanted all of our listeners to hear is that the highest rate of OSHA claims and injuries to construction workers by far is not car accidents. It’s not getting struck by something. It’s not getting something cut or lacerated.

It’s literally falling off of something. And the number one cause of falling out of something is getting in and out of a truck or a piece of equipment’s on a job site, it’s parked on uneven land, and you might step right off into a pothole.

Securing a load on the back of a trailer. These young guys just jump off the back of it. They say that a 200 pound person has over 2,500 pounds of pressure on their joints just jumping or falling three and a half feet. So number one rule is three points of contact on ladders and equipment, hands and foot at all times.

These problems don’t happen if you have three points of contact.

We had stickers at McDaniel Whitley to literally have our contractors put near the doorjams and the handles just so they’re at eye level when the contractor or employee is getting out of that equipment or truck.

I can say honestly, Wade, it’s 80 percent of the claims we’re having. Most of them are soft injury tissue claims. And those are the ones that run, $40 to $80,000. You’re just like, blah, blah, blah, blah.

[00:14:29] Wade Carpenter: I gotta ask, is that the technical term for it?

[00:14:31] Stephen Brown: Blah, blah, blah, blah, blah? Yeah, that’s a technical term. It’s crazy. It’s crazy, but it causes injury. You’re not going to be an old construction laborer jumping off of stuff. You’re just not going to be.

The young guys, they think they can do it and they probably can a little bit. Then you jump off and you’re not wearing the right footwear and you twist an ankle. Old football injuries, jumping off a piece of equipment. They all of a sudden show up.

Anyway, I’ll end the show with my most interesting claim, and that was called, the title of it on the Worker’s Comp Report and on the last runs was called Testicular Tension.

[00:15:11] Wade Carpenter: Okay.

[00:15:11] Stephen Brown: This guy was a weightlifter, and he was carrying six sheets of half inch CDX plywood decking on his shoulders, up a ladder, and when he got up to the roof, he straddled a beam.

[00:15:25] Wade Carpenter: Oh, Lord.

[00:15:26] Stephen Brown: Yeah, even though he was on steroids, it was bad. It was a $99,000 claim. Not to mention just the pain. It was painful for me telling our listeners about that claim, but I can honestly tell you when I think I’ve seen it all, I haven’t.

And listen to me when I tell you: three points of contact. I might recommend that you preach in every toolbox meeting about three points of contact. Thank you.

[00:15:51] Wade Carpenter: All right, great!

[00:15:52] Stephen Brown: Yeah.

[00:15:53] Wade Carpenter: Know you told me you were going to tell a story, but I’m not sure I wanted to hear that one, but that’s okay.

[00:15:58] Stephen Brown: There you go.

[00:15:59] Wade Carpenter: All right thank you. This has been great, Stephen. I appreciate all the great information.

And thank you all for listening to the Contractor Success Forum. Check out the show notes at Contractorsuccessforum. com or on the Carpenters TPA’s YouTube channel for more information.

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