Although not all employers are aware of stop gap coverage, it is critical to be aware of it if you operate a business in certain states. There are a few other things to keep in mind with stop gap coverage:
- In monopolistic states that do not offer employers liability insurance, such as North Dakota, Ohio, Washington, and Wyoming, stop gap coverage is essential.
- Stop gap coverage is incorporated into an employer’s workers’ compensation policy in the remaining states that are not monopolistic.
Is stop gap coverage required in Ohio?
If your company operates in one of the four monopolistic states (North Dakota, Ohio, Washington, or Wyoming), you should consider Stop Gap Coverage. Stop Gap Coverage, while not required by law, provides crucial protection against employee injury lawsuitscoverage that is often included with workers’ compensation insurance, with the exception of monopolistic states.
- You own a workplace or work environment where employees may be harmed or killed as a result of dangers and risks in the surrounding region.
- Your company works in a field where there is a higher-than-average danger of harm or death.
- If you are sued, your small or medium business may go out of business.
- Your company operates in several states, at least one of which is monopolistic.
- Injured employees or their family members have filed claims and lawsuits against your company in the past.
Self-insurance is an alternative, but it’s only available in Ohio and Washington. You must also prove your eligibility as a self-insurer in these two states by submitting an application to the state and supplying papers and financial records demonstrating your ability to self-insure.
What is monopolistic state?
A monopolistic state fund is one in which the government holds a monopoly. Monopolistic states are those that manage monopolistic state money. Private insurance companies are not permitted to sell rival funds in these states.
What is employee benefits liability coverage?
Health, dental, and life insurance, profit-sharing plans, workers’ compensation, and employee stock programs are all covered by EBL insurance. Typically, EBL insurance is sold as a stand-alone policy.
EBL Insurance Scenarios
In the case of an HR manager mistakenly forgetting to enroll a new employee in the company-sponsored health plan, EBL insurance could safeguard your organization from financial liabilities. After a car accident, the employee is horrified to learn that he or she does not have health insurance at the hospital. Because the failure to enroll was caused by an error or omission in the administration of a health plan, EBL insurance could reduce your company’s exposure.
Furthermore, EBL insurance may shield companies from some ACA-related liabilities. Consider a scenario in which your company’s independent contractors file a lawsuit claiming they were wrongfully misclassified as independent contractors. They believe that they should be classified as full-time employees and thus be covered by the Affordable Care Act’s health insurance provisions (ACA). In such a circumstance, an EBL insurance coverage could protect your company, presuming the misclassification was not done on purpose.
EBL vs. Fiduciary Liability
EBL insurance is frequently confused with fiduciary liability insurance. While the two types of insurance have certain similarities, EBL insurance is meant to protect organizations from mistakes and omissions in a variety of schemes. Fiduciary liability insurance, on the other hand, tries to shield organizations from ERISA (Employee Retirement Income Security Act) exposures resulting from a wrongful act for explicitly designated plans.
Fiduciary liability insurance is more comprehensive than EBL insurance because it covers not only administrative errors and omissions, but also responsibility for a breach of fiduciary duty resulting from negligent acts in employee benefit plan administration. Furthermore, many EBL insurers expressly exclude any claims arising from ERISA violations.
Where does the term stop gap come from?
Stopgap (n.) also stop-gap, 1680s, from stop (v.) + gap (n.); the idea possibly being of something that plugs a leak, but it could also be from gap (n.) in a military meaning of “opening or breach in defenses by which an attack may be conducted” (1540s). Since the 1680s, it has also been used as an adjective.
What is a gap endorsement for title insurance?
Illinois, as a “race-notice” jurisdiction, gives a tremendous incentive to register documents that give evidence of a real estate interest as soon as possible. To provide constructive notice of an interest in real estate, real estate deeds and encumbrances (such as mortgages, installment contracts, and judgements) must be publicly published. Such notice is given in Illinois by recording the deed, mortgage, or other instrument in the Office of the Recorder of Deeds in the county where the real estate is located. Unrecorded instruments bind only the parties involved in the transaction and any additional parties who have actual notice of the transaction.
Bona fide purchasers (BFPs) in race-notice jurisdictions protect their real estate interests only if they record their instruments before any subsequent purchasers. A purchaser must fairly explore the public records for title problems and have no actual knowledge of such defects to be declared a BFP. Delays in recording, on the other hand, could give a genuine buyer the opportunity to get clear title to a property that had already been purchased by someone else.
Consider the following scenario: Smith sells the identical piece of real estate to Jones first, then to Wilson three days later. Jones and Wilson are completely unaware of one other’s actions. Jones will have clear title to the land if she documents her instrument before Wilson. Wilson, on the other hand, will win clear ownership to the land if he records the instrument before Jones. In race-notice jurisdictions, this scenario gives a tremendous incentive to record instruments rapidly.
A savvy real estate buyer will verify the public records to make sure there are no encumbrances or other title flaws against the property. A commitment for title insurance, which is based on a title search of the public records maintained in the Office of the Recorder of Deeds, usually provides this type of information to a real estate buyer. A title search of the public records on a specific date, on the other hand, may not always reveal the most up-to-date information regarding the property’s title on that date. Due to indexing delays at the Office of the Recorder of Deeds, title searchers and title insurance agents should be aware of the “gap” problem that may emerge. Between the time an instrument is submitted to the Recorder of Deeds for recording and the time it is actually indexed so that it may be located during a public records search, there is a gap period. Because incoming documents cannot always be instantly indexed to offer prompt notice to the public, there is a constant indexing delay in public records. When an instrument is brought to the Recorder of Deeds, it is given a document number and has the date and time stamped on it. Based on the document number, date, and time, the instrument takes precedence over other instruments in Illinois. However, due to a backlog of instruments at the Recorder of Deeds, it may take up to two weeks for the instrument to be indexed and found during a title search. Because Illinois is a race-notice state, the title insurer may be exposed to additional risks.
The title searcher and title insurance agent must work together to reduce the risks connected with the indexing-delay-gap and other gaps. Recognizing the relevance of the commitment’s effective date, conducting a date-down search, comprehending the Gap Coverage Endorsement, and quickly recording instruments of conveyance can all help to mitigate these risks.
Although a title insurance policy protects an insured against certain unforeseen dangers, the risk to the title insurance company is reduced thanks to pre-printed special exemption language in the title insurance commitment and an accurate public records title search. The commitment contains an exemption that prohibits coverage for any encumbrances that attach after the commitment’s effective date but before the deed or mortgage is recorded. The commitment’s Special Exception No. 1 reads as follows:
Defects, liens, encumbrances, adverse claims, or other issues, if any, established, first appearing in public records, or attaching after the Effective Date but before the prospective Insured buys the estate, interest, or mortgage thereon covered by this Commitment for value of record.
This exception transfers liability for encumbrances that were obscured from the title search due to the indexing delay to the insured.
The title insurance agent must confirm that the commitment’s effective date represents the date on which instruments at the Office of the Recorder of Deeds were really indexed, not only the date of the most recent title search. As previously indicated, there may be a backlog of documents that have been given a date, time, and document number but have not yet been indexed so that they may be found during a title search. When doing a title search, the title searcher should check the date on which all papers presented to the Recorder of Deeds for recording have been indexed or posted, and consider that date as the commitment’s effective date.
Because there could be thirty days or more between the effective date of the commitment and the closing date, a date-down search is frequently undertaken soon before closing. A date-down search is a second search of the public records done soon before the office closes. It just looks at the time between the start of the search and the end. Prior to closing, this search should provide the buyer and the lender with the most up-to-date information regarding the status of the title. Any new encumbrances uncovered during the date-down search must be immediately raised as exceptions to coverage. The Date Down Endorsement 1 can be used to change the commitment’s effective date as well as add or remove exceptional exclusions.
However, the indexing delay gap affects date-down searches as well. Furthermore, even in counties where instrument indexing is nearly instantaneous, there is always a window of opportunity to register encumbrances between the date down search’s effective date and the date the deed and mortgage are recorded. As a result, purchasers and lenders can ask for a Gap Coverage Endorsement or include a closing instruction asking for Special Exception 1 to be waived or removed. The Gap Coverage Endorsement serves as a seal of approval for the commitment. It protects the buyer or lender against encumbrances that occur between the commitment’s effective date and the recording of the deed vesting title in the proposed insured. As part of an ATG Agency Escrow Closing, this sort of coverage is automatically supplied to the buyer and lender. The Gap Coverage Endorsement may be issued, or Special Exception 1 may be waived, for non-agency closings on residential real estate in Illinois if the following conditions are met:
Why do I need stop gap coverage?
Stop gap coverage protects employees from claims that their employer failed to create a safe working environment. While workers’ compensation insurance covers work-related injuries, the policy also covers the employer’s responsibility. It shields the employer from liability in the event of a worker’s injury or illness.
A monopolistic state fund’s workers’ compensation insurance does not include the portion of the policy dealing with employer liability. Employers should consider acquiring stop gap coverage from an insurance provider to avoid a worker holding the company accountable for an injury or illness.
What is Workers Compensation monopolistic?
Any state with special legislation requiring workers’ compensation coverage to be given exclusively through the state’s workers’ compensation program is referred to as a monopolistic state. There is no open market for workers’ compensation insurance in monopolistic states, and private companies are not allowed or offered to provide such coverage. Monopolistic states do allow some businesses to self-insure, albeit the criteria for becoming a self-insuring employer are stringent. Ohio is one of four monopolistic states in the United States at the moment.
The Ohio Bureau of Workers’ Compensation
While almost every state mandates workers’ compensation insurance for all firms except sole proprietorships, partners in a partnership, and people organized as a corporation (with no employees), Ohio’s Bureau of Workers’ Compensation (BWC) has a few critical distinctions.
Ohio is a monopolistic state, which distinguishes it from the majority of other states. Ohio, Washington, Wyoming, and North Dakota are the only states with state-controlled BWC markets. Ohio has the largest state fund in the country, with assets valued at more than $19 billion, and is the country’s second-largest underwriter of workers’ compensation insurance. More than 280,000 businesses are covered by the BWC, which has paid out more than $1.9 billion in workers’ compensation payouts, processed more than 185,000 new claims, and collected more than $2.1 billion in premiums and assessments.
In addition to the BWC, the state of Ohio requires companies to collaborate with Managed Care Organizations to manage all claims medically. Employers have the option of selecting their preferred MCO partner or allowing BWC to do so.
Many companies also hire a third-party administrator (TPA) to help them avoid the legal difficulties of Workers’ Compensation Insurance claims. TPAs can also negotiate group ratings for their clients, which can result in significant savings for businesses. TPAs and MCOs frequently collaborate to make it easier for injured workers to return to work.
How to secure coverage
The state of Ohio is the insurance company. Because of the stringent requirements for self-insurance, the BWC covers more than two-thirds of Ohio workers. The Application for Ohio Workers’ Compensation Coverage, often known as the U-3, is the initial step in acquiring coverage for your employees. While the application is not difficult to complete, it is beneficial to gather some information before commencing the U-3. These are some of the items:
- Your company’s full legal name or your own (if operating under your own name)
- Your business’s Federal Identification Number (FEIN) or your personal Social Security Number
- For classification purposes, a full description of the type of job your company does and the equipment it uses.
Self-employed individuals, company partners, family farm corporation officers, and individuals formed as corporations are not automatically insured. In the U-3’s Elective Coverage and Owners/Officers/Ministers sections, you can voluntarily elect coverage.
Your company’s BWC insurance will be considered effective after we receive a completed application and a $120 non-refundable application fee. Payments can be made by check, money order, credit card, ACH, or in person at any of the BWC Customer Service Centers. It is crucial that you submit your first installment payment on time.
Stop-gap coverage
Workers from these states cannot be covered by multi-state workers’ compensation plans due to the restrictive nature of monopolistic state markets. If a company operates in numerous states, one of which is a monopolistic state, the company will need to purchase separate workers’ compensation plans to protect all of its employees.
Furthermore, unlike policies in open market states, monopolistic states’ workers’ compensation policies do not contain coverage for the employer’s obligation. Employers’ liability in monopolistic states is typically covered by a general liability policy endorsement. Employers’ liability insurance is commonly referred to as “stop-gap” coverage because it is purchased through an endorsement.
Workers’ Compensation Insurance protects your employees
In monopolistic states, workers’ compensation insurance programs are similar to those in other jurisdictions. Workers’ compensation is nevertheless strictly controlled and subject to severe pricing limits by the state, even in jurisdictions where companies can shop for insurance on an open market. When a business and their employee go through a workers’ compensation claim in Ohio and other monopolistic states, they are dealing directly with an administrative arm of the state government. Workers’ compensation insurance exists in every state to protect your most precious resource – your employees, regardless of their market type.
Subscribe to our blog and follow us on social media to stay up to date on everything Sheakley. Participate in the conversation by leaving a comment below.
What states have their own workers compensation?
Workers compensation insurance, which is a legal necessity in most jurisdictions, is obtained on the private insurance market. Some states, on the other hand, prevent private insurers from selling workers’ compensation insurance and instead force companies to acquire coverage from a government-run fund.
The four states having this requirement are referred to as monopolistic states: North Dakota, Ohio, Wyoming, and Washington. Here’s everything you need to know about each state’s government-run fund.
Workers Compensation in North Dakota
North Dakota Workforce Safety & Insurance is the provider in North Dakota (WSI). If a company employs people in the state or sends employees to work at a company there, it must acquire workers compensation insurance. Employers must fill out an application, which may be found on their website here, in order to obtain a policy.
Finally, for employees who have been out due to injury, the WSI offers a return-to-work program. The goal of the program is to bring injured workers back to work as quickly as possible, and it involves medical claim management, vocational case management, and reemployment aid.
Workers Compensation in Ohio
Businesses with one or more employees in Ohio must acquire workers compensation insurance from the Ohio Bureau of Workers Compensation (BWC). Employers have two options for obtaining coverage:
The BWC sets the rates that are charged. Employers are categorised using the NCCI method, and all employers who meet certain criteria are included in the state’s experience rating scheme. The BWC determines each employer’s experience modifier.
The BWC also offers discount plans to encourage firms to focus on safety, efficiency, cost control, and return-to-work. These plans contain a deductible plan, a group experience rating, and a retrospective rating.
Unlike other monopolistic states, Ohio allows employers to self-insure if they meet specific criteria, including as financial stability and at least two years of BWC experience.
Workers Compensation in Wyoming
Workers compensation insurance must be purchased from the state fund by businesses with employees in Wyoming, according to the Wyoming Department of Workforce Services (DWS). Prior to purchasing a policy, you must first register.
The North American Industry Classification System (NAICS), which is based on six-digit codes, is used to classify workers in Wyoming. The DWS is in charge of assigning the appropriate categorization to each employer. The website has a list of base rates. In addition, depending on experience rating, the DWS creates experience modifiers for all qualifying employers.
Wyoming does not allow self-insurance, however it does provide a high deductible program for businesses that qualify. The amount of the deductible varies from $1,000 to $100,000.
Workers Compensation in Washington
Workers compensation insurance must be purchased from the Washington State Department of Labor and Industries by businesses employing any workers in the state of Washington (L&I). Washington’s OSHA-approved occupational and safety program is likewise overseen by the L&I.
Businesses operating in Washington must apply for a business license and create an account with the L&I. The L&I decides the correct classification after reviewing the application. Washington has developed its own four-digit classification system. On the L&I website, you may see rates. If there is an experience rating, the L&I will calculate the appropriate experience modifier.
Workers compensation in Washington does not have a deductible plan, but it does allow for self-insurance provided certain conditions are met.
Stop Gap Coverage
Last but not least, in monopolistic states, workers compensation programs do not contain employer liability. As a result, firms must add it to a private, multi-state workers compensation coverage or a general liability policy as an endorsement. Stop-gap coverage is what it’s called.
