S. Dakota Director: No Work Comp Premiums for True Independent Contractors

Merle Scheiber, director of South Dakota’s Insurance Division, issued a reminder to workers’ compensation insurers that bona fide independent contractors are not required to carry workers’ comp insurance under state statute.

Scheiber said the division has found that some workers’ compensation insurers have been charging premium for bona fide independent contractors in South Dakota.

Scheiber’s Sept. 5 bulletin reminded companies writing workers’ compensation insurance business that they must:

• Have an adequate process in place at policy inception and at audit time to determine whether individuals are independent contractors; and
• Provide written notice to insureds that costs of independent contractors may be included in premium charges should those individuals fail to show they are an independent contractor under the insurer’s process.

The division will review insurers’ processes and notices to determine their adequacy.

Examining payroll and noting the existence or absence of workers’ compensation policy certificates alone do not constitute an adequate process to charge premium for independent contractors.