Must-Read Contractor Articles

By Abe Boling 

When preparing for a Workers' Compensation (WC) insurance audit, it's important to know what auditors look for and how to avoid costly mistakes. Here are the top tips and insights commonly recommended online, both from insurance companies and audit professionals:

Before the Audit

• Understand Why It Happens

Audits are used to reconcile your estimated payroll against actual payroll. Your premium is based on payroll and job classification codes, so changes to these factors affect the final price.

• Know What They’ll Ask For

Auditors may request Payroll records (payroll journals, tax forms like 941s and 940s, W-2s, 1099s), Certificates of insurance for subcontractors, Job descriptions, Timesheets or logs (especially if multiple class codes apply), and QuickBooks or accounting system reports.

• Verify Classification Codes

Ensure employees are categorized correctly by job duties. Misclassification (e.g., assigning a roofer as a clerical worker) can trigger major penalties or back premiums.

• Separate Payroll by Job Type

For businesses with multiple types of work (e.g., roofing + office staff), keep detailed time records. Without them, all payroll may be assigned to the highest-risk (and most expensive) code.

During the Audit

• Be Organized and Transparent

Present clean, complete records. Don’t send any information not requested.

• Have Certificates for All Subcontractors

If you paid subs, make sure they have their own Workers’ Comp coverage. Without a valid certificate, you could be charged as if they were your employees.

• Clarify Owner Exclusions

If you or other owners/officers are exempt from coverage, be sure that’s reflected and supported by documentation.

• Designate an Audit Contact

Have a knowledgeable staff member (or yourself) walk the auditor through the documents. Avoid letting the auditor “dig around” without context.

After the Audit

• Review the Audit Report Carefully

Mistakes are common. Look for: Incorrect payroll totals, Misclassified employees, Included/excluded subcontractors, and Incorrect owner status.

• Dispute Errors Promptly

Most carriers have a short window (30–60 days) to dispute audit findings. Be ready to submit supporting documents quickly.

 Did you know?

Dawn Nelson, who works at our office, has been helping contractors navigate Workers Compensation audits for nearly 17 years. Her expertise has saved hundreds of companies both time and money throughout the process.

By Abe Boling 

We all know the routine: collect certificates of insurance (COIs) from subcontractors before work begins. Most contractors understand the obvious reasons — general liability verification, workers’ comp audits, and contract compliance. But there’s a bigger, more critical reason that’s often overlooked:

The doomsday scenario — a claim on your jobsite.

If your subcontractor causes damage, injury, or worse, the difference between a properly vetted COI and a box-checked one could mean the claim ends up on your insurance policy instead of theirs.

Too many contractors go through the motions without realizing that a few extra steps can make all the difference in protecting your business. Here’s what to double-check (and what most people never learned to look for):

 The COI Checklist You Actually Need

Subcontractor’s Legal Name

Must exactly match the name on your contract. No shortcuts here.

 Active Policy Dates

Confirm the coverage is currently in force and won’t expire before your project wraps up.

Required Coverages

Check for: General Liability, Workers’ Compensation, Commercial Auto, Umbrella/Excess Liability (depending on job size/scope).

Professional Liability, Pollution Liability, etc., if trade-specific.

 Additional Insured & Waiver of Subrogation

You should be listed as Additional Insured. A Waiver of Subrogation should apply, often required for both GL and WC policies.

Look for language like: “Your Company Name is included as Additional Insured.”

 Certificate Holder Section

Ensure your business name and correct mailing address are listed.

 Insurance Company Rating

All policies should be with AM Best-rated carriers (A- or better).

 Common Red Flags

• COI is handwritten or has visible edits
• Policy dates don’t align or are missing
• Required coverages or limits don’t meet contract standards
• No endorsements provided when requested
• Carriers are poorly rated or unknown

 Pro Tips

• Keep a COI tracking log with renewal dates
• Require COIs before any subcontractor steps foot on-site
• Use a compliance tracking tool or ask your insurance broker to help with review
• For high-risk trades or jobs, don’t rely solely on the COI — always request endorsements

By taking a few extra minutes upfront, you can avoid months of stress, finger-pointing, and potentially costly claims on your own policy. A little diligence now can save your business down the road.

Have questions or want help reviewing COIs for your subs? I’m always happy to help.