by Workers’ Comp
A Workers’ compensation is governed by 50 different state laws, and it is a crazy patchwork quilt that defies a simple one-size-fits-all answer. In some states, owner-operators can opt out of coverage. In other states, there is a statutory exemption, and in many states, it is determined by state law and various indicia of control exercised by the company over the owner-operator’s independent actions.
The problem you mention is a recent but more frequent occurrence. It is difficult for workers’ comp insurers to assess the risk of claims from owner-operators. For example, owner-operators ordinarily are exempt from workers’ comp in Tennessee, but because of a fluke in the statute, they now are subject to the workers’ compensation act in North Carolina. If a Tennessee-domiciled owner-operator has an accident in North Carolina and seeks recovery there, a workers’ comp claim can be brought against the Tennessee-domiciled carrier and his insurer under the North Carolina statute.
However, this possibility does not mean it is fair or an exercise in good faith for a workers’ comp insurer to assess, after the fact, a full workers’ comp premium from carriers that have owner-operators. Your insurer should have worked with you from the outset to ensure you disclosed the existence of your owner-operators and made sure that you were not exposed to the devastating surprise of full workers’ compensation premiums by audit; his failure to do so may give rise to an errors and omissions claim.
Best practices for carriers with owner-operators in states where workers’ compensation coverage is not mandatory traditionally has been to require the owner-operator to carry occupational accident insurance and for the motor carrier to secure contingent liability coverage indemnifying it against any workers’ comp claim brought against it, notwithstanding the owner-operator’s recourse to his own policy.
In almost every incident, the combined cost of occupational accident insurance and contingent coverage for the carrier is far less than a workers’ comp premium. Depending on the state of domicile, that difference can be $2,000 to $3,000 per year per owner-operator unit. That is real money, and you deserve to have been forewarned.