Part Five of a WC&EL policy grants the insurer the right to which action?

• A. Cancel the WC&EL policy because of failure of insured's duties.
• B. Subrogate against negligent third-parties.
• C. Conduct inspections of the insured's workplaces.
• D. Audit the insured's books and records to determine the accurate payroll.

Answer: (D)

Premium audit provisions let the insurer verify the insured’s actual exposure after the policy period to set the final premium. In workers’ compensation and employers liability policies, the premium is often based on estimated payroll and classifications during the term, then adjusted to reflect reality through an audit. Part Five gives the insurer the right to examine the insured’s books and records to determine the accurate payroll and other data used to compute that premium. If the audit shows more payroll than anticipated, the final premium increases; if it’s less, the premium may decrease. This mechanism ensures the premium aligns with actual risk exposure. Other policy actions like canceling for duties, subrogation against third parties, or inspections of premises are governed by different parts of the policy and aren’t the focus of this premium-audit provision.