Workers’ Comp Insurers Must Check Criminal List When Claim is Filed

February 19, 2003

Unless a claim is filed, workers’ compensation insurers reportedly would not know if an employee’s name is included in the infamous Specialty Designated National (SDN) list of criminals and terrorists targeted by the U.S. government.

The National Association of Independent Insurers (NAII) sent a letter to the Office of the Foreign Assets Control (OFAC) clarifying this issue that appeared as a question in the OFAC document, “Questions Frequently Asked By The Insurance Industry.”

“An employer may have a list of his or her workers covered by the workers’ compensation policy, but the insurance company issuing the policy to the employer, in most cases, would not have a list of those employees until a claim is filed, ” Kathleen Jensen, NAII insurance services counsel, remarked. “However, once a claim is filed the insurer has the responsibility to check the SDN list and report within 10 days to OFAC if the claimant’s name appears on the list. In addition, the insurer must freeze and block payment of a claim, putting claim monies into an interest bearing account.”

The question that appeared in the OFAC document that prompted NAII’s response asks: “A workers’ compensation policy is with the employer not the employee. Is it permissible for an insurer to maintain a workers’ compensation policy that would cover a person on the SDN list, since the insurer is not transacting business with the SDN, but only with his/her employer?”

The OFAC answer: “No, it is not permissible because the insurer would be providing an indirect benefit.”

Jensen made it clear that the workers’ compensation insurers would not knowingly provide an indirect benefit since that company would not have any knowledge about whether a person is on the SDN list until a claim is filed.

“The primary responsibility to check whether an employee’s name appears on the SDN list belongs first to the employer. The insurance company’s duty to check this information only exists once the name is revealed,” Jensen said.

In its letter to OFAC, NAII offered to assist in re-wording the specific question and answer to reduce confusion and clarify the message for all interested parties.

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