A few years ago, Riggs Construction “had two back injuries with big payouts, and our experience mod was 1.3,” Hagerty says. To lower its mod, the company worked with its workers’ comp provider to create a detailed safety program that includes meetings, a booklet, and periodic jobsite visits by the insurance company.
Few remodelers want to invite an insurer onto the jobsite, but, Curotto says, “if they can help you reduce your mod, you’ll save a bunch of money.” And by following their advice, “you can compete better and keep your business running.”
Rewards-based programs tend to work best, Leininger says. Offer employees a bonus for each quarter the company is accident-free. See if your insurer will pitch in. Big Sky Construction, San Jose, Calif., recently received a $3,200 “safety incentive” check from its professional employer organization (PEO), which operates its workers’ comp program. “I split it with the guys,” owner Jeff Winn says.
CLASSIFY ACCURATELY Another key factor in workers’ comp costs is how you classify and track your employees. States assign classification codes to employees based on past loss experience for others doing similar work. Most use data from NCCI (see page 102). By accurately coding your employees and tracking the work they actually do, you may be able to significantly cut your workers’ comp costs.
For instance, if a carpenter divides his time between second-story framing and interior trim work, your provider may let you classify him accordingly. “No insurance company will call the contractor a liar so long as it’s documented and recorded,” Kinsey says. “It’s a very cool way of saving tons of money.
Another option may be to classify by the job. In Missouri, for instance, workers’ comp for carpenters and laborers ranges from $9.42 to $14.40 per $100 in payroll. “Interior trim work, small remodel jobs, and interior renovations are a much lower rate than additions, exterior framing, and more ‘dangerous’ work” that is typically performed by home builders, notes Tom Riggs of Riggs Construction. His broker convinced the insurer to let Riggs classify by the job instead of by the man, slashing workers’ comp expenses 25% in the first year.
Make sure that your classifications reflect your company’s current focus. If you used to do mostly additions but you now specialize in kitchens, reclassifying could dramatically cut your workers’ comp costs.
CERTIFY YOUR SUBCONTRACTORS “If you hire uninsured subs, just forget it,” Curotto says. If anything goes wrong, you as general contractor will take the hit, either through your own insurance or the courts.
Use written subcontractor agreements that explicitly state your insurance requirements, indemnify you for their mistakes, and require that their policies list your company as an additional insured. Always get documented proof of their current coverage, and keep it on file. Mark IV is “rigid about getting certificates of insurance from everybody we deal with,” Scott says. “Our absolute standard is: without an insurance certificate on file, you don’t get paid.”
For sole proprietors and other very small subcontractors, remodelers frequently waive insurance requirements, often with the state’s approval. At Mark IV, the rule is that “you either carry workman’s comp or we take 20% out of your payment until all insurance liabilities are resolved,” Scott says.
But insurers “are starting to require that even sole prop subs have workers’ comp on themselves,” Simmonds says. “Having an indemnification clause won’t be enough. You’re going to have fewer and fewer choices as insurers clamp down.” He adds that many workers’ comp providers are also starting to require that owners have coverage on themselves, even if they rarely swing a hammer or climb a ladder.