DENVER, Oct. 21, 2024 /PRNewswire/ — Some small business owners are hiring ghosts.
Instead of signing up for legitimate workers’ compensation insurance and covering themselves and their employees, they get a “ghost policy” that covers no one.
A ghost policy shows proof of workers’ comp coverage when bidding on a job without offering the certificate holder access to any benefits in the event of an accident.
Not surprisingly, 23 U.S. states have banned ghost workers’ comp policies. The cost of this “not-exactly workers’ comp” insurance can be devastatingly high for business owners and their workers.
Why do ghost policies exist in the first place? A sole proprietor working at a desk job may not need workers’ comp insurance at the same level a tree trimming business would. In the few states where ghost policies are legal, it’s possible for a sole proprietor to choose a ghost policy and leave themselves uncovered.
But these situations are rare. More often, businesses that need to show proof of workers’ comp coverage to bid on jobs use ghost policies to cut corners.
An investigative series found multiple instances of abuse of ghost policies in North Carolina. The report confirmed that of the roughly 140,000 policies written each year, over 16,000 were ghost policies targeted to “high-risk employers that couldn’t buy workers’ compensation insurance on the open market.”
The consequences can be tragic. In one case, a contractor lost his business when a worker dubiously classified as an independent contractor suffered a paralyzing injury in an on-the-job accident. The ghost policy left everyone exposed.
In Colorado, where workers’ comp insurance is mandatory for employers, the potential for abuse was high enough that the legislature enacted a law allowing the state Division of Workers’ Compensation (DWC) to levy fines of up to $500 per day.
According to the DWC, Colorado injured workers filed 34,600 lost-time claims in 2022, the latest year for which there is workplace injury data available. There’s no way to know for sure how much income, revenue, and profit got lost in those claims, but a quick review of workers’ comp judgments in the state suggests the total could range well into the tens of millions.
Workers’ compensation benefits protect both a business and its employees with medical care and lost wages during recovery. Trying to buy a ghost policy is a gamble not worth taking.
Media Contact:
Liz Johnson
liz.johnson@pinnacol.com
SOURCE Pinnacol Assurance
source link – Workers’ comp ghost policies are putting businesses at risk, according to Pinnacol Assurance