Q   What happens when an insured's workers compensation experience mod exceeds 1.25? Does OSHA step in?

A   With regard to workers compensation experience modifications, OSHA does not affect nor is OSHA affected by workers compensation with one exception. The only provision made in the OSHA law regarding workers compensation is for a National Commission on State Workers Compensation Laws to evaluate state workers compensation laws--in order to determine if such laws provide an adequate, prompt and equitable system of compensation for injury or death arising out of or in the course of employment.

OSHA's primary triggers are the accident reports made by employers or employee complaints.

To answer part of your question, the size of a workers compensation experience modification is not the trigger for an OSHA inspection or OSHA intervention. OSHA and experience modifications are two separate and distinct entities. OSHA is not involved in the development of experience modification factors; they don't watch or are they initiated by experience modification factors.

However, since the underlying cause of high workers compensation experience modifications are on-the-job accidents and injuries and OSHA's involvement is based upon accident and injury reports submitted by the employer, there may appear to be a relationship where there is none. It is common for operations with high experience modifications also to be actively involved with OSHA.

In answer to the rest of your question, some of the things that may happen with a high experience modification are:

* an individual insurer--in jurisdictions where allowed--may choose not to write an account

* an individual insurer may write an account only if specific situations occur such as pre-inspections and loss control recommendations that are fully complied with

* the account may be placed in state pool or facility

* the account may be placed in an insurer-developed substandard program--again, in jurisdictions where allowed

* the account may be placed in rating plans that allow for debit rating, retrospective rating or other type of rating increase in addition to the experience modification

Q   We have an insured who sells merchandise wholesale and who recently shipped items C.O.D. to a customer via a third-party delivery service. The customer paid for the merchandise with a counterfeit cashier's check and has since disappeared.

Our insured is covered under a businessowners policy that has an extension of coverage for $10,000 for "Money Orders and Counterfeit Paper Currency." This coverage is similar to that provided under the ISO Crime Coverage Form R and reads, in part:

Money Orders and Counterfeit Paper Currency: We will pay for loss due to the acceptance in good faith, in exchange for merchandise, money or services, of any post office or express money order, issued or claiming to have been issued by any post office or express company, if the money order is not paid upon presentation ...

The insurance company has taken the position that there is coverage for counterfeit money orders, but not for counterfeit cashier's checks.

I believe that they are splitting hairs over the wording of the policy as opposed to applying a liberal interpretation of the policy language as required by the courts. The basis of this opinion is that according to Black's Law, both a "cashier's check" and a "money order" are considered to be instruments used to guarantee that funds are available. Also, our insured's banker has told me that banks treat the two instruments identically. Both are guarantees issued by the bank that have been paid for by the customer (money orders also can be issued by other entities). He said that the only difference between the two is that the cashier's check is made payable to a payee and signed by a bank officer while a money order is signed by the customer and the payee field is left blank.

Counterfeiting of both instruments has gotten to be a problem lately. Cashier's checks are considered to have a slightly higher degree of confidence to them (and they cost more to obtain), so what is the logic in covering counterfeit money orders but not counterfeit cashier's checks? It is my opinion that whoever wrote this coverage part simply failed to include the words "and cashier's checks" after money orders, but the intent to cover them is there.

A   This situation is intriguing and resulted in some interesting research. We will respond to whether or not there truly are differences between money orders and cashier's checks.

Starting first with the Federal Deposit Insurance Corporation (FDIC), we learned that cashier's checks and money orders are considered to be two distinctly different types of negotiable instruments. Different regulations and state laws apply to the handling of each.

An FDIC definition of cashier's check follows:

Federal Deposit Insurance Corporation:

I. 229.2(i) Cashier's Check

1. The regulation adds to the second item in the Act's definition of cashier's check the phrase, "on behalf of the bank as drawer," to clarify that the term cashier's check is intended to cover only checks that a bank draws on itself.

The definition of cashier's check includes checks provided to a customer of the bank in connection with customer deposit account activity, such as account disbursements and interest payments. The definition also includes checks acquired from a bank by noncustomers for remittance purposes, such as certain loan disbursement checks. Cashier's checks provided to customers or others are often labeled as "cashier's check," "officer's check," or "official check."

The definition excludes checks that a bank draws on itself for other purposes, such as to pay employees and vendors; and checks issued by the bank in connection with a payment service, such as a payroll or a bill-paying service. Cashier's checks generally are sold by banks to substitute the bank's credit for the customer's credit and thereby enhance the collectibility of the checks. A check issued in connection with a payment service generally is provided as a convenience to the customer rather than as a guarantee of the check's collectibility. In addition, such checks are often more difficult to distinguish from other types of checks than are cashier's checks as defined by this regulation.

We contacted the FDIC directly for some additional clarification and received the following:

"Thank you for contacting the FDIC.

A cashier's check is a bank-issued check, also called official check or treasurer's check, signed by a bank officer and drawn against funds of the bank itself. A cashier's check is generally regarded as good as cash. A money order is an instrument of exchange issued for a fee, often used by persons who do not have checking accounts to pay bills or send money to someone in a distant city.

Money orders are issued by post offices and financial institutions, usually in amounts under $500.00, and carry both the payee's name and the payer. Those issued by a bank are drawn on the issuing bank or a correspondent.

Both cashier's checks and money orders are negotiable instruments covered under state law.

Hope this is helpful.

Hugh Eagleton FDIC-DCA"

The conclusion that can be drawn from this is that while similar in many respects, cashier's checks and money orders are two different types of negotiable instruments and are treated differently with respect to both the issuing institution and state regulation/law. Different laws and regulations apply.

As such, cashier's checks would most likely have to be specifically mentioned in the coverage grant in order to be covered.

The coverage grant itself does not appear to have changed in its scope or wording since Simplification in the mid-1980s.

With this in mind, look again at policy language to make sure that the wording is clear. In BP 00 01 01 97, Businessowners Standard Property Coverage Form, it states:

h. Money Orders and Counterfeit Paper Currency

We will pay for loss due to the good faith acceptance of:

(1) Any US or Canadian post office, express company, or national or state (or Canadian) chartered bank money order that is not paid upon presentation to the issuer; or

(2) Counterfeit United States or Canadian paper currency;

in exchange for merchandise, "money" or services or as part of a normal business transaction.

The most we will pay for any loss under this Additional Coverage is $1,000.

The same or similar wording that you mentioned appears in the special businessowners coverage form and the commercial crime coverage form.

The coverage grant is fairly clear and specific in that it covers only the two mentioned negotiable instruments and apparently no others. It covers money orders and counterfeit paper currency only. There is no indication and the grant does not contain any wording to the effect that coverage is for money orders and similar types of negotiable instruments or any other phraseology that would lead one to think that more than just the two types of instruments are covered.

Thus, it appears that not only are cashier's checks not covered, neither are other commonly used negotiable instruments such as traveler's checks.