The conditions enumerated in a
workers' compensation policy define rights and obligations to the parties. They
outline governance of the day to day relationship between a carrier and an
insured.
Typical conditions include:
1. The first named insured is solely responsible for all insured parties
concerning premium payment, communications such as cancellations, refunds, or
additional audits.
2. The insured cannot transfer rights or duties to a third party without
written consent from the insurance provider. For example, in the case of a
merger of two companies, the selling company cannot assign coverage to the
buying company, or transfer a favorable experience modification.
3. Policies are considered as one year terms for administrative purposes.
Premium rates, modifications or any administrative concern is handled as though
the term were one year. Three year policies are fairly rare in the modern era
of workers' compensation. Fixed rate three-year policies have a modifying
clause to eliminate this condition. Three-year retrospective plans are
calculated on an annual basis, and as such, have lost their appeal to potential
buyers.
4. Inspections. The insured must allow inspections of premises and operations
so the insurance company can assess safety and loss control concerns.
5. Cancellation. Policies can be cancelled, for example non-payment of premium,
under conditions outlined by the state authority. Usually, the cancellation
condition includes a front end period, like two months, for the insurance
company to decline the risk. The carrier usually must cancel at least some
minimum time prior to renewal or the policy automatically renews. Of course,
non-payment has a statutory warning and time to correct.
These conditions are important to understand and honor. They protect the
insured and the carrier so the governance of the policy is smooth. Typically,
conditions establish a mutual respect between the insured and carrier. The
right to inspect but the obligation to report back, and offer advice. Mutually
beneficial management.