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Beware cancellation of Assigned Risk Plan workers’ comp

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Employers that can’t get workers’ compensation insurance in the private insurance market can get coverage through the Minnesota Workers’ Compensation Assigned Risk Plan (MWCARP).

To get the coverage, an employer typically pays a small estimated premium.

Then, at the end of the policy period and following an audit to determine the appropriate premium, the agency sends two bills—one for the balance of the first year’s coverage and another for the second year.

The adjusted premium may be far more than the original premium, and the agency may quickly cancel coverage if the employer doesn’t send payment immediately.

Advice: Put aside money to avoid sudden cancellation of MWCARP workers’ comp coverage.

Recent case: Outdoor Specialties and Landscaping had trouble getting workers’ compensation insurance through the private insurance market, so it went to the MWCARP. It paid just $508 to start the policy at the beginning of a one-year term. Then, near the end of the term, the employer got a bill for $13,300, representing the balance of the first-year premium. At the same time, the company also got a bill for the second year.

It made a payment on the second year, but didn’t immediately pay the outstanding balance for the first year. MWCARP then sent a cancellation notice—and a few days after the notice took effect, an employee was injured and needed workers’ comp benefits.

MWCARP refused to pay, and the company sued. It said it never got the actual cancellation notice. But the court said MWCARP could cancel by mail, and posting the letter was all that was necessary. The company wasn’t covered. (Outdoor Specialties and Landscaping, No. A07-0441, Minnesota Court of Appeals, 2008)

Final note: Let this case be a lesson that someone needs to make sure all coverage is in effect. A simple tickler file and follow-up with the agency would have prevented this problem. Plus, try to get a good idea of how much the premium will cost as early as possible so that you aren’t caught by surprise. 

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