Need advice for getting workers comp in SOCAL: Construction

Bottom Line: I have a nonstandard situation and need advice on what I should do to get new workers comp insurance (which expires today) for my 3 year old construction company in California.

Buckle up because this is a long one unfortunately… I can’t explain how happy getting this resolved will make me because right now I am feeling like I get to lay off my staff Monday till I get this resolved…

Overall Situation:

I have owned a business for 3 years, our coverage lapsed today because none of the several brokers I have spoke with over the past month can figure out how to get me insured without completely misrepresenting my company. State Fund will not renew my company without wrapping my silent investor’s other, completely unrelated, insurance into the same policy – My business is a construction company that subcontracts 100% of the actual construction work, the other business is a pet grooming business. State Fund wants to increase them from their current rate of 2.47 to over 6.25 if we did that, which is outrageous…

For my company, I am the GC, Class B1 with a ton of certifications and industry experience – I tried having in house staff but I couldn’t train, manage and supervise them while selling projects, dealing with insurance companies and all of the other admin work. I spent hundreds of thousands on creating a lead generation system that I am finally happy with but in order to do all of that work in house I would need a staff of 15 to 20 people, as a company that has mainly been bootstrapping growth that isn’t feasible – Because of that I no longer do any field work in house – I changed our operating standards over the past 2 quarters to be project management, lead generation and lead sales – we receive leads, evaluate projects, estimate and outline work based on the IICRC standards and best construction practices, sign/sell projects and then we call a licensed, insured, and vetted subcontractor that has a standing contract with us to sell the signed projects for % of the estimate value – a subcontractor arrives taking the standardized scope of work and does the actual work based on what we outlined. If there is an issue on the project we act as a consumer advocate and make sure they get exactly what agreed to. This has worked very well and we have only been receiving 5 star reviews.

We return one time at the end of the project to verify the subcontractor did the work we designated, then we get a certificate of satisfaction signed and collect payment. During the project the owners of the property only call us for billing or insurance related questions – otherwise they are directed to talk to the subcontractor about onsite decisions and work schedules as it is their personnel and schedule. All subcontractors go through an onboarding process with us and have to have their insurance and w9 in our CRM to be utilized. Our employees do not operate any tools or perform physical construction, restoration or janitorial work.

Our Real breakdown of what our Workers Comp should be:

Employee 1: Administrative Assistant lives in a different state and works from home full time answering phone calls, scheduling and performing computer tasks (8810) 17/hr

Employee 2: Operation admin, full time manages company operations from the office,  trains our coordinators and directs GCs/subcontractors (5606) 78k/yr

Employees 3+4: 2x Restoration Project Coordinators: Responsible for answering phone calls, conducting pre-construction estimating and project sales/signing, organizing subcontractors to site and overall project management. Only onsite 2-3 times during the process. The rest of their time is spent in the office or generating leads/networking. One is at 21/hr and the other at 25/hr (8742)

At the end of the day we are a Project Management office/consumer advocate – The general feedback I am getting is: None of the workers comp companies want to insure what they deem as a “Paper contractor” because they won’t make enough money on a class B contractor.

Multiple brokers have informed me that when they input the correct codes for my company into the automated systems, they receive an automatic denial from all carriers. To circumvent this issue, many brokers have resorted to misrepresenting my company to the carriers in order to secure approval. However, I take pride in running an honest business, and the codes they suggest using to increase the chances of approval would result in rates that are 5 to 10 times higher than what I should be paying.

There are numerous businesses, such as architectural firms or consulting companies, that operate with only sales and administrative staff while subcontracting all their work. My company essentially follows a similar model, and I believe it is unfair to face automatic rejection based on this structure alone. At this point, I am unsure of the best course of action to resolve this situation and would appreciate any input, as I feel I have exhausted all available options.

I have explored the possibility of self-insuring, but according to the regulations I have researched, this is not a viable option for my company, as I do not possess the required $5 million in business assets. I looked at using a POE but I don't have enough payroll/employees. I have also asked brokers to consider alternative arrangements, such as selling the leads outright to other contractors who would then sign the contracts and pay me a fee. However, I have been informed that this approach is not feasible either because the root problem is not that I sub work it is that I don’t present a profitable enough risk for them to insure.