Being a business owner entails a great deal of responsibility which ranges from ensuring the satisfaction of clients to safeguarding the well-being of employees. During these difficult and unpredictable times, it is essential to secure the health and safety of your employees who are the driving force behind your business. While accidents and any unfortunate events are inevitable, one can always prepare in order to minimize any risks and avoid further business losses. One way of doing so is by getting a ‘worker’s compensation insurance coverage’.
A workers’ compensation insurance coverage is designed for the benefit of both the employer and its employees. By procuring this policy, employers can prevent minimize the risk of any financial burden stemming from possible legal suits from their employees claiming reimbursement.
Since the workmans compensation insurance policy usually includes an ‘exclusive remedy provision’ that stipulates that the employee is prohibited from suing its employer for a work-related injury if they are receiving benefits from the said policy. While some exceptions to this provision may apply, employees are usually barred from suing their employer if there is work comp coverage. At the same time, employees covered under this policy are assured of monetary benefits in the event of any work-related: illness, injuries/disabilities, or lost wages.
In most states, it is required for employers to have a worker’s compensation insurance coverage on behalf of their employees, failing to do so they may face a penalty ranging from a hefty fine to imprisonment. Consequently, this insurance policy is not only beneficial for your business but a necessity to avoid any legal suits against your business.
What is Workers’ Compensation Insurance Coverage?
A Workers’ Compensation Insurance Coverage can be likened to a ‘safety net’ for your employees. As a safety net, the insurance policy covers the medical costs, rehabilitation expenses, funeral expenses, and lost wages brought about by any work-related accident or work condition. It must be emphasized, that this policy only compensates for “work-related” injuries, occupational diseases, lost wages, or death. To illustrate, an employee can claim compensation under this policy if he or she incurred an injury while doing a task related to his or her job.
However, there are certain exceptions in which an employee cannot be compensated under this policy. One obvious exception is when the injury or death of the employee is not in any way connected to his or her work. Another exception is if it is a self-inflicted injury stemming from willful misconduct. A timely claim against the insurance provider is also crucial to ensure that the employee would receive proper compensation under this policy.
On the part of the employers, this insurance coverage may act as a shield against any lawsuits from your injured employee, as they can easily claim reimbursement from the insurance provider instead. Instead of the employer, it would be the responsibility of the insurance provider to pay the incurred lost wages, medical or funeral expenses of the employee covered by the policy.
In this way, even if your employee incurs any injury as a result of his or her work there is an assurance that the insurance policy is there to answer for their medical expenses. Consequently, in the long run, it would be cheaper for the employer to get a workmans Compensation Insurance Coverage for its employees.
Further, most states require employers to have a work comp insurance policy for their workmen. A majority number of states mandate this even if the employer only has one worker. While in other states, there is a certain number of workers before the insurance requirement can apply against the employer.
But, what if you as the employer fails to get Workers’ Compensation Insurance Coverage for your employees and one of your employees gets injured while working. What should you do now?
The first thing that you must know is that as a general rule, as an employer you are legally obligated to compensate your employee for work-related injury, illness, or death. Consequently, if your employee gets injured while working and you do not have a Workers’ Compensation Insurance Coverage to act as a safety net. Then generally, you as the employer shall be personally liable for the payment of the medical expenses, rehabilitation expenses, funeral expenses, or lost wages incurred by the employee.
Needless to say, this would significantly affect your business especially if you are a small business owner as it would result in a big dent in your finances. Especially since work-related accidents and illnesses can strike at any time even during the most inconvenient times. Without this insurance policy, there is a considerable chance that you may suddenly find yourself searching for money to pay for the hospital bills incurred by your employee as a result of a work-related injury. Therefore, as a business owner, you can save yourself from worry and stress by procuring an insurance policy that shall minimize the risks against you.
It is also important to discuss the potential legal liability you may face as an employer for failing to get work comp coverage for your employees. Most states in the country require business owners to get this insurance policy for their employees with certain exceptions provided by law. The employer exposes itself to potential lawsuits from its employees and the state if found guilty of failing to comply with the specific state law.
Legal liability against employers.
The legal processes involving a claim of an employee against an uninsured employer purely depends on the specific state law that is applicable. The penalty for non-compliance ranges from a payment of a hefty fine to imprisonment. In some states, the court can even stop all business operations until the employer complies with the insurance policy requirement for its employees. In addition to this, employees who incurred a work-related injury or illness may file a lawsuit against the employer who failed to have a Workers’ Compensation Insurance Coverage.
In the State of Minnesota, there is a penalty of a fine of up to $1,000 for each employee per week during the time the employee was not insured against the employer. In addition to this, the injured employee may seek reimbursement from the Special Compensation Fund. If granted, the employee shall receive appropriate payment from the said fund.
However, the employer shall be liable for its reimbursement plus the payment of a penalty in the amount of 65 percent of those benefits.
In Colorado, the business shall be liable to pay a fine amounting to a minimum of $250 for each day that the employer fails to insure its employees. This fine may even increase if there are any subsequent violations. In addition to this, a cease and desist order may be given against the business which means that it cannot continue its operations until it complies with the insurance requirement.
In Oregon, state law mandates that an employer without insurance shall be liable for the benefits that its employees ought to receive. This is on top of the penalty charges for non-compliance with the insurance policy coverage.
While in Florida, a business may face a fine that is twice the amount that it should have paid for insurance premiums in the preceding two years wherein they failed to provide insurance coverage for their employees, or pay a fine of $1,000, whichever is higher.
There are some exceptions to the workers’ compensation insurance requirement. An example of this exception is in the State of Texas, wherein it is usually not mandatory for employers to have said insurance policy for their workmen.
However, this poses significant risks on the employer as they may be liable for personal injury lawsuits from their employees which entails expensive legal fees and time-consuming litigation.
In this case, the employer cannot use the argument that its worker is negligent as a way to escape liability. That is why employers in Texas may still choose to subscribe to an insurance policy in order to minimize risks and protect themselves from any legal liability as a result of a work-related injury.
Getting insurance coverage may be costly at first, especially for small businesses. It is a smaller price to pay than putting yourself at risk from possible lawsuits which are not only costly but time-consuming as well. In fact, the cost of possible legal fees, penalties, and claims from the lawsuit may be far greater than expected.
As the saying goes, “Prevention is better than cure.” Therefore, procuring a work comp Insurance Coverage for your employees should be one of the things you may consider to minimize risks against your business.
By doing so, you will not only protect your business but also the well-being of your employees. Since there are varying rules and regulations regarding workers’ compensation in different states, it is crucial that you choose the best policy that works for your needs.
Advantage Insurance Solutions in Denver, Colorado, has a team of insurance experts who will assist you in finding the best insurance plan that is compatible with your business needs.
Our dedicated team also assists clients from more than 40 states, to search for the best value and reliable insurance coverage for your company. Contact us today and let’s talk about how you can effectively minimize the risks against you and your employees.