“We have a fantastic relationship with the LSL team. They keep our interests top of mind and maintain a positive reputation in the industry.” —Craig Whetter, President | David Wilson Automotive Group (relationship since 1983) Adam Odom, CPA, Partner Assurance & Advisory adam.odom@lslcpas.com LSL | CPAs & Advisors | Irvine & Sacramento, CA | The Woodlands, TX | lslcpas.com/automotive | 949.829.8299 Donald Slater, CPA, Principal Consulting & Advisory donald.slater@lslcpas.com David Myers, MST, CPA, Partner Tax & Advisory dave.myers@lslcpas.com POST-CLAIM STEPS • Promptly report all claims to the carrier — even declinations with signed forms. In California, the 90-day rule for workers’ compensation claims means that if the insurance carrier fails to accept or deny a claim within 90 days of it being submitted to the employer, the claim is presumed accepted. Any delay in submitting claims can result in claims being accepted by default, even the fraudulent ones, and they can cost you a pretty penny. • Ensure supervisors investigate each claim and notify your carrier if legitimacy is in question. Flag the three Fs: frivolous, fictitious and fraudulent. If a third party is at fault, pursue subrogation. • Offer modified duty, when possible, to reduce costs. If an employee denies a bona fide modified work duty offer, the insurance company can stop the payments on indemnity. • Work closely with your claims adjuster by providing the requested information quickly for efficient claim handling. MANAGING CLAIMS Stay actively engaged in the claims process — ask for updates frequently. Open claims with high reserves are a major reason X-Mods increase. Remember that legal expenses do not affect your X-Mod, but illegitimate claims should always be challenged. Sometimes settling quickly is more cost-effective than allowing claims to linger. For litigated cases, voluntary resignations may be part of the settlement strategy. The best claim is one that is prevented, and the next best is one that is promptly closed. CALCULATING COSTS We used payroll data and losses incurred over a four-year period to calculate an employer’s workers’ compensation premium. For example, the 2025 X-Mod basis for policy renewal on Jan. 1, 2025, is WC claims from 2021, 2022 and 2023. Although claims from 2024 are excluded from the X-Mod calculation, they remain critical for underwriting. Even with a favorable or “credit” X-Mod, a dealership with multiple recent claims may be viewed by carriers as having a weak safety culture, which can lead to fewer quotes and/or higher premiums. Before submitting data, ask: • Is your payroll data correct? Payroll data for the service department that includes both technicians and service drivers will cost you. The risk for service advisors working behind computer screens in an air-conditioned office is significantly lower than that of a technician working in the shop, facing physical risks from moving machinery and heavy lifting; hence, a lower premium rate is applied to advisors. Ensure they are classified differently. • Are X-Mods calculated correctly? According to insurance brokers, 75% of all X-Mods are incorrect. • Are subrogated and joint claims included or missing? COST SAVINGS To illustrate insurance premium calculations (which may vary based on the difference in injury rates), hypothetical calculations were made for two employers, Employers I and II, who have the same payroll. On the next page, Table A shows the payroll data for each type of employee. Table B illustrates the excessive injuries of Employer I and Employer II. Employer II has four more injuries than Employer I, resulting in a total loss of $282,500, compared to a total loss of NCDA.COM 15
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