Hello friends, this scenario happens quite often in Florida.
A good case that I like to relate is the case of U.S. Builders, L.P. v. DFS, DoAH Case#07-4428 (see docket at: https://www.doah.state.fl.us/ALJ/searchDOAH/docket.asp?T=12/11/2012%202:59:36%20PM). This case actually has FOUR fascinating components; Today, I will talk about the issues involved regarding U.S. Builders, L.P.’s (hereafter, “USB”) reliance on their Texas workers’ compensation insurance policy. The other component is USB’s Request for Hearing, this is also very interesting, but since it happens so rarely, I will talk about that issue in my next blog post. Another component, not mentioned in the case above, is what happens when one of your subcontractors fails to get a valid form of workers’ compensation coverage. The final component is how USB narrowly avoided a Stop-Work Order and got an Order of Penalty Assessment, instead (This will be talked about in another blog entry later.).
So the basic facts behind this case are pretty simple: USB is contracted to build a Walgreens in the Jacksonville area. Because it’s a relatively large construction project it brought the attention of the Division of Workers’ Compensation Compliance Bureau (“DWC”). The DWC investigators stopped by and checked to see if the general contractor, USB, and its various subcontractors had valid workers’ compensation insurance policies (“WC policy”). The investigators contacted the USB foreman and he showed the investigators his WC policy/ The WC policy was from a Texas insurance company and it was a valid WC policy for Texas, included on the policy was an “all-states endorsement.” An “all-states endorsement” appears to be one of those insurance salesman things that they pitch when they don’t really know what they are talking. This type of endorsement allows you to work in a lot of states, but not all of the states, it covers about 35 of the 50 states (It should be called a “some-states-endorsement”.).
So we have a company, USB, with a WC policy that’s valid in Texas and quite a few other states. They come to Florida to work. They get the permit to begin construction. They start working, then they get issued a Order of Penalty Assessment (“OPA”) for even though they have a WC policy (Why they did not receive a Stop-Work Order is another topic). What went wrong?
Well, I was the prosecutor in this case, so I am very familiar with the details.
1. The Texas WC Policy was valid in Texas and in many other states. When we deposed the insurance carrier, the carrier even said “that were an accident to happen in Florida, USB would be covered.” This seems pretty much good for the righteous intent and purpose of the law, right? Not quite, see #2.
2. Florida has a zero tolerance policy for those companies who come here to work and don’t have workers’ comp coverage. In the DWC’s viewpoint, USB had NO coverage. USB and it’s good faith belief that it did have coverage was inconsequential. The fact that the insurance carrier, under oath at the deposition, stated that any industrial accident would be covered made a hill-of-beans worth of difference.
3. What needed to have happened for the DWC to have been satisfied, is for the WC policy to have contained a Florida Specific Endorsement. The problem lies at the foot of the insurance salesman. The insurance salesman did not know enough about workers’ compensation coverage requirements, outside of Texas. If he did, he would have sold USB the Florida Specific Endorsement.
So the moral of the story is: you are on the hook for bad choices/ ignorance of your insurance agent. Florida is not a reciprocal state for “all-state” WC policies. Certain states like Florida, New York, California, and a few other “big union” or large population states require their own state-specific endorsements.
The good news is that an error committed by your insurance agent will usually be covered by his “errors and omissions” policy, which they are required to have. This is why the case went to trial in retrospect, because without that judgment against USB, they probably would not have been able to recover from it. I’m am pretty sure in the end that is why we spent nearly a year litigating a $14k case. I would be sure that USB’s legal bills were covered by the insurance agent’s policy.
Now on to the interesting part: Why doesn’t Florida accept other states WC coverage? After-all, if the insurance carrier mentioned in their deposition that they would have covered any industrial accident that occurred, whether or not the policy was valid in Florida, is not that want the spirit of the law wants: workers to be covered in case of an accident? My personal understanding of the issue which was confirmed when the opposing counsel asked a similar question to our Jacksonville Bureau Chief. Essentially, there are several reason: most insurance companies are not as generous as the carrier that answered the deposition. If they are not legally required to cover an accident, then the insurance is operating on charity’s sake. Florida lawmakers don’t believe that insurance companies will be as charitable as that company, that means if a worker did get hurt, he could become a burden to the public as he check’s into the emergency room and is then forced to take unemployment, the medical bills may not be covered by any insurance but if the workers’ comp policy is in effect all of those things are covered. A second rationale is that certain states outside of Florida have lower WC policy rates than Florida. This means that the out-of-state company may actually have a competitive advantage if the home state has a lower WC insurance premium rate (each state has their own rates assigned due to various factors such as litigation, payout amounts, etc.). So imagine a scenario when a hurricane hits Florida and part of the recovery efforts include having out-of-state contractors come to Florida for the rebuilding effort (Dept. of Business Professional Regulation will waive the license requirements if you are licensed in another state); you don’t want to have a large number of inexperienced crews of roofers falling off roofs, getting denied by their out-of-state carriers and then have a giant public expense incurred by the residents of Florida.
Well, I hope that helped, and as I mentioned there are several other parts of this case which merit discussion, stay tuned!