Don't Fear an Insurance Audit
June 23, 2021
Don’t fear an Insurance Audit

The term audit is often misunderstood and sometimes feared when a business owner receives the notification that their insurance policy is being audited. Never fear, your trusty insurance advisor is here to help you through this sometimes confusing, and often irritating audit process. There are two main types of policies that can be audited. They are the worker’s comp policy and a liability policy.


Worker’s Comp Policy Audit

The worker’s comp audit is a reconciliation of your payroll estimate that was reported to your carrier at the beginning of your worker’s comp policy term and comparing it to the actual amount that was paid to your employee. These amounts are broken down by the employee’s classification code, as determined by the class guide of your worker’s comp board by state. Each class code has a different rate, and each class has a specific scope of work that is entailed in the class code description. There are several codes that are similar and include comparable work functions across industries--so it is imperative to talk to your agent about the duties of each of your employees. Putting an employee’s payroll into the wrong class code will skew the audit; and when reconciled it can either go in your favor with a lower rate or go against you with the payroll being applied to a class with a higher rate.


How an Audit Process Works

A worker’s comp auditor may contact you through various channels including by mail, phone, or electronic submissions, which are the most popular, although paper audits are still done when necessary. An auditor will typically ask you to provide your:


  • Federal 941 tax forms
  • A detailed payroll report of the dates included in the policy period,
  • A general ledger of expenses or profit and loss statement
  • Certificates of insurance from any sub-contractors that were used during the year


It is important that you provide this information in a timely manner and cooperate with the auditor during this process. This is a requirement set out within your policy.


Be aware that in NY State, all sub-contractors who do work for you should have their own worker’s compensation coverage in place. If they do not have worker’s comp insurance, the audit will consider that person on your payroll with regard to worker’s compensation in whatever class they best fit. So anytime your business needs a plumber, electrician, or roofer, make sure they have worker’s comp or call your agent for a rate to include it in your bid for work as an expense. The general ledger is requested to ferret out these independent/sub-contractors in your books; so stay ahead of the game, and request proof of coverage before they start the job, or certainly before they get paid.


A pay-as-you-go payment platform is a great way to mitigate the difference of your estimated versus actual premiums on a worker’s comp policy. This payment platform allows you to report your payroll in real time and the premiums are pulled out of your payroll account shortly after you’ve reported to the worker’s comp carrier. SimcoHR has access to several carriers that have the ability to offer this payment option. As a bonus, when you also have your payroll done by SimcoHR, the payroll reporting and the audit process is smooth and much less stressful because we already have copies of most of what you need! Call SimcoHR today and talk to us about whether this option is right for your business and how we can help you navigate the world of worker’s comp audits.


Liability Policy Audit

The second type of audit business owners may encounter is the liability audit. Liability is rated differently dependent on the type of business. A manufacturer or a retailer are rated based on gross sales. A contractor will be rated on payroll, and some risks are rated based on square footage or the number of units in the case of habitational risks or lessor’s (or commercial landlord’s) risk buildings. Whether the rating is based on  sales or payroll, the amount that you report when the policy is taken out is what your liability premiums will reflect. If you’re a food establishment, the sales may be broken out between food sales and liquor sales. If you’re a contractor, an owner is considered on the payroll at a pre-set amount and all of the employee payroll should be included in that figure as well. You may notice that these figures are further broken out in the liability rate between two main liability coverages. A different rate usually applies to your premises and operations section of your policy (what you do and where you do it) and products and completed operations section (what you make). When the two rates are combined you can calculate the premium amount for your general liability coverage.


If your audit results in an additional premium, that amount will be billed to you by the carrier or the agent to be paid. In addition, you may see an endorsement to your renewal policy amending the rating basis for the renewal term to match the prior term. Fair warning, if your agent chose the incorrect class code for your business operations, an auditor is within their rights to make the change to your class and charge the appropriate rate for that class on the policy term in question along with the renewal.


The insurance professionals here at SimcoHR are here to help you get it done right and assist you through the audit process to make it as painless as possible, so if you have any questions or would like a free assessment whether your commercial insurance is with us or not, give us a call.

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New York Employers Must Update Employee Handbooks for Reproductive Health Rights

February 3, 2025
Overview of the New Ruling New York employers are once again required to provide a notice in their employee handbooks about reproductive health rights following a recent ruling from the U.S. Court of Appeals for the Second Circuit. The ruling vacated a previous permanent injunction that had blocked the enforcement of the law, meaning employers must now comply with the New York Reproductive Health Bias Law (Labor Law § 203-e). Reproductive Health Bias Law Requirements The Reproductive Health Bias Law was enacted in November 2019 to ensure employees and their dependents can make reproductive health decisions without facing discrimination in the workplace. The law prohibits employers from taking retaliatory actions against employees regarding their reproductive health decisions and requires employers to keep employees' reproductive health information confidential unless there is prior written consent. Under the law, employers must include a notice in their employee handbooks informing employees of their rights and remedies under the Act. This is an essential update that must be made to comply with the law. Impact of the Second Circuit Ruling Religious organizations had challenged the law, arguing that the notice requirement violated their First Amendment rights. However, the Second Circuit disagreed, ruling that the notice requirement was lawful and similar to other workplace disclosure laws. The court noted that while the policy motivating the law may be controversial, the law itself and the obligation for employers to comply are not in question. Action Required for Employers Even though there is no specific penalty for failing to comply with the notice requirement, employers are encouraged to review and update their employee handbooks in light of the court's ruling to ensure they are compliant with the law. For Simco Clients: For clients who utilize Simco’s employee handbook services, rest assured this requirement is already included, and no additional steps are needed.

Pre-Employment Drug Testing: What Job Seekers Need to Know

February 1, 2025
Pre-employment drug testing is a hiring practice that has sparked debate in recent years. While some industries rely on it for safety and compliance, others are rethinking its necessity—especially as marijuana laws evolve. If you're actively job searching, knowing what to expect can help you prepare, avoid surprises, and understand your rights. Who Still Requires Drug Testing? Not all industries conduct pre-employment drug testing, but for certain roles, it's still a non-negotiable requirement. Some of the most common sectors where testing remains standard include: Transportation & Public Safety – Truck drivers, pilots, transit operators, and law enforcement Healthcare & Childcare – Nurses, physicians, pharmacists, and daycare providers Government & Military Contracts – Federal employees, military personnel, and defense contractors Manufacturing & Construction – Heavy equipment operators and industrial workers handling hazardous materials However, policies vary widely even within these industries. Some companies are now loosening restrictions for non-safety-sensitive positions, recognizing that outdated drug testing policies may limit their talent pool. What Substances Are Typically Screened? Most pre-employment drug tests screen for common illicit substances, but the depth of testing can vary. Standard screenings include: Five-Panel Test – Detects marijuana, cocaine, amphetamines, opiates, and PCP Expanded Panel Tests – Can include benzodiazepines, barbiturates, synthetic opioids, and even alcohol Employers may use different types of tests, including urine, saliva, blood, or hair follicle analysis. Hair follicle testing, for example, can detect drug use from months prior—something applicants should be mindful of. The Evolving Landscape of Marijuana Testing One of the most significant changes in pre-employment drug testing involves marijuana. With over half of U.S. states legalizing marijuana in some form, companies are reevaluating their stance. Some states prohibit employers from disqualifying candidates for off-duty marijuana use. Other states still allow testing but require employers to prove impairment, not just presence. Federally regulated positions, such as those in transportation, maintain strict no-tolerance policies. This shift means that while some applicants may no longer face automatic disqualification for marijuana use, it’s still important to know an employer’s policy before assuming it won’t impact hiring decisions. What Happens If You Fail a Pre-Employment Drug Test? The consequences of failing a drug test depend on multiple factors, including company policy, industry regulations, and state laws. In regulated industries (e.g., transportation, healthcare, federal employment), a failed test almost always results in immediate disqualification. Some employers allow re-testing or a waiting period before reapplying, particularly for marijuana use in certain states. If you have a valid prescription for a tested substance (e.g., opioids or ADHD medication), you may need to provide documentation to avoid disqualification. Additionally, some companies offer assistance programs or second-chance policies, especially if an applicant is upfront about past use or addiction recovery. Do Employers Really Benefit from Drug Testing? With the workforce evolving, many companies are questioning whether traditional drug testing policies still serve their intended purpose. Some argue that testing reduces liability, improves workplace safety, and ensures reliable employees. However, others believe that outdated policies exclude qualified candidates, especially in a competitive job market. The Arguments for Drug Testing: Reduces workplace accidents in safety-sensitive roles Ensures compliance with federal and industry regulations Discourages drug use in high-responsibility positions The Arguments Against Drug Testing: May eliminate qualified candidates for non-safety-sensitive roles Does not account for impairment vs. past use (especially with marijuana) Can be costly and time-consuming for employers Companies that still require drug testing must weigh these factors and ensure their policies align with modern workforce expectations. The Future of Pre-Employment Drug Testing The debate over drug testing isn’t going away anytime soon. As laws and attitudes continue shifting, companies may move toward impairment-based testing rather than zero-tolerance screening. This means job seekers should stay informed, especially in industries where testing is likely to remain a requirement. For now, the best approach is to understand employer expectations, know your legal protections, and be prepared for potential screenings as part of the hiring process.

OSHA Form 300A Requirements: Key Deadlines for Employers

January 30, 2025
Workplace Posting for Form 300A Begins February 1 Employers with 11 or more employees at any point in 2024 must display the Occupational Safety and Health Administration (OSHA) Form 300A, Summary of Work-Related Injuries and Illnesses, from February 1 to April 30. Even if no recordable incidents occurred in 2024, this posting is mandatory. The form must be certified by a company executive and displayed prominently in each workplace where employee notices are typically posted. Certain businesses are exempt from OSHA’s regular recordkeeping requirements, including this posting, if they employ 10 or fewer people or if their primary business activity is considered low hazard according to OSHA's guidelines. A full list of low-hazard industries, categorized by NAICS codes, is available here . However, even exempt companies must report fatalities or incidents resulting in hospitalization, amputation, or loss of an eye. Electronic Submission of Form 300A Due by March 2 Businesses with 250 or more employees from the previous year, or those with 20-249 employees in high-risk industries, must submit their Form 300A data electronically through OSHA's Injury Tracking Application (ITA) by March 2, 2025. This requirement applies based on the number of employees at a specific location, not the entire company. Employers under State Plans are also required to submit electronically. Exemptions from this electronic submission apply to employers who: Are exempt from OSHA's regular recordkeeping rules. Had fewer than 20 employees in the past year. Had between 20 and 249 employees but aren’t in the designated high-risk industries. Additional resources, FAQs, and access to the ITA are available on OSHA’s ITA page . Submission of Forms 300 and 301 Required by March 2 Employers in high-hazard industries with 100 or more employees are required to submit data from both their Form 300 (Log of Work-Related Injuries and Illnesses) and Form 301 (Injury and Illness Incident Report) through the ITA, in addition to their Form 300A submission. Help with Coverage Determination Employers can use OSHA’s ITA Coverage Application to assess whether they need to submit injury and illness data electronically or refer to the State Plan for specific reporting requirements.

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