Residential Contractors

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This is the text of the testimony Willis Ponds, Co-Founder of Ponds & Sons, gave before a South Carolina Senate Subcommittee hearing on January 31, 2007 in Columbia.

Good morning. First I would like to introduce myself. My name is Willis Ponds, and I am Vice-President of Ponds and Sons Construction. We are a residential contractor based in Colleton County and servicing most of the lowcountry of South Carolina. I am a 4th generation home builder, and my Great-grandfather started building homes here over 60 years ago.

First, I would like to thank Chairman Martin, and Senators McConnell, Hutto, Ritchie and Lourie for holding this important hearing today. I hope that the testimony and experiences that I will relate to you today will help you in your decision making process as this committee works to reform our worker's compensation system.

There are 3 main points that I want to make today about the workers' compensation system: first, that the lack of affordable workers' comp insurance is leaving workers at risk, secondly, the cost of the system is out-of-control and hindering business growth and finally, that it is crucial that a comprehensive solution with real reforms be passed this year.

As a contractor, I often work with subcontractors, and, like me, my subcontractors are small business owners. Our company carries workers' comp insurance as required by law, and we also try to adhere to a policy of only hiring subcontractors that also carry worker's comp insurance.

However, a lot of times I am not able to find subs with workers comp insurance to work for me because there is a significant lack of affordable insurance for these subs to buy. Subcontractors that can not afford the insurance will either have to be covered by my policy or, as is often the case, will buy a "ghost" policy, excluding themselves from the coverage. These policies do not provide real workers comp coverage at all because it assumes that the policy holder is self-employed with no other employees. This is often not the case as most of these subs actually do have two or more employees and these employees are not covered under this "ghost" policy. To compound the problem, some of these subcontractors will require their employees to act like subcontractors and buy a "ghost" policy too. The end result is that there are a lot of workers out there that do not have any insurance coverage at all and all because there is a lack of affordable insurance for them to buy. In my opinion this situation is unacceptable and must be remedied at once.

If one of these workers gets hurt on one of my jobs and the subcontractor has a "ghost" policy, guess who ends up paying the bill - me. We need to address the lack of affordable insurance by making it less costly to purchase in the first place.

As I mentioned earlier, we've been in the construction business for over 60 years and because of our long history and experience in the business we are doing okay. However, if my workers comp premiums weren't so high and if workers comp cost weren't so high in general then I could do more work and do it quicker. I could bid and take on more jobs and ultimately achieve my goal to increase my volume and revenues every year. I would like to hire more employees and have more available subcontractors so we can work more jobs, create new divisions of our company and expand our business. But because of the risk of hiring uninsured subcontractors and because of the ever increasing cost of paying workers' comp on employees it's too often not worth the investment or the risk. Furthermore, if I hire a new employee or an uninsured subcontractor it scares me to death to know that they may be injured causing my insurance rates to skyrocket and setting my business behind years if not ruining me completely. Because of this fear I have to be far more selective with whom I hire and thus limit ourselves tremendously in the amount of work that we can perform.

I am not alone in this belief. Many of my business friends share the same concerns about expanding their business. We would like do more work; there is plenty to go around if you're looking, but that work comes at a cost. And right now the cost of getting more work too often outweighs the benefit. I have read in the newspaper where workers' comp premiums have increased by double digits for the 3rd year in a row. Personally I have seen my workers' comp rates increase by over 11% from 2005 to 2006 and that was with a 4% rate reduction for having no accidents. This is the equivalent of a 15% rate increase on premiums, and that is with no claims against me. That seems to me to indicate that the cost of this current system is out of control, and I think fraud is a large part of the reason why the system is so expensive. We need to get rid of the fraud so that the costs of the system come down. The system we have right now is just not affordable and it is stunting the growth of my business as well as many others too.

As a contractor my goal is to build the best possible custom home for the least possible cost. I want my homes to be affordable to as many people as possible. Sometimes though the difference between affordable for some people and not affordable is the difference in workers' comp premiums from last year to this year. Real workers' comp reform will not only reduce risk and cost for contractors and increase coverage for employees but will also make good houses more affordable for the average South Carolinian.

I want to make my final point very clear. As a small business owner, I need a comprehensive solution with real reforms this year. For all of small business, we need a comprehensive solution with real reforms this year. I know that elected officials have a lot of groups pulling them in all directions. But I think we need to take bold steps to address a worker's compensations system that is out-of-control. Please pass meaningful and comprehensive worker's compensation reform this year.

In conclusion, I would like to thank each of you for your service to our state, and thank you again for the opportunity to speak today. Thank you.