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The Texas Department of Insurance's Division of Workers' Compensation (DWC) regulates the state's workers' compensation system and also certifies employers that want to self-insure.
Texas doesn't require most private employers to carry workers' compensation insurance. Employers who contract with the government are required to provide workers' compensation coverage for each employee working on the project. Some clients may also require their contractors to have workers' compensation insurance.
Employers who choose not to have workers' compensation insurance, Nonsubscribers, must file an annual notice with the Texas Department of Insurance. The must also display notices of no-coverage and give written statement to each new employee hired.
Texas has a highly unusual position as employers are not required to carry workers' compensation. Texas is the only state which does not require coverage. However, there are exclusions to this rule for some employers listed below:
This presents several scenarios for employers. They can “go bare” which leaves them open to civil suits for personal injury based on common law, which can be bought by any employee or worker who is misclassified. This can result in very high awards which are not limited by statutory amounts which may result in severe economic loss to the employer. The employer is estopped from using some forms of legal defenses including contributory negligence on the part of the worker or another employee and negligence of a coworker.
Alternately, the employer may choose to participate and voluntarily carry workers compensation for employees. Thus, when an employee is hired he or she has 5 days to elect to retain the common law right to sue for personal injury; or to choose to be covered by workers' compensation. If the employee elects workers compensation, the employer may receive a benefit, as the employee will receive benefits determined by the Workers Compensation statutes and the Workers Compensation Board and cannot sue the employer under common law. The employer must give the employee a Notice of Right to elect one or the other option within 5 days. The Notice is available on the Workers compensation website. Employers should give the employee this form on the date of hire and obtain a signed and dated copy of the election after signing.
A business or company may self-insure if the can meet the financial requirements. They can also self-insure under the State’s Insurance Fund
If the employer does not carry workers compensation then they must file a DWC005, Notice of Non-coverage. This form must be filed annually by the end of April each year. This form and instructions are available at www.tdi.texas.gov. See the website for more details
If you do not have workers compensation insurance coverage you are referred to as a nonsubscriber in the directions and statutes. If you have 5 or more employees you are still required to report on the job injuries and illnesses. The forms, directions, tutorials and other helpful information are available on the Texas Department of Labor website above.
Certain types of workers, usually considered independent contractors, may be found to be employees in Texas, if they are under the employer’s direct control. This would mean they have to be covered for workers' comp and receive the same right to elect workers' compensation coverage. This usually comes about when an independent contractor is determined to be misclassified by the state at the time an injury is incurred or the worker tries to file unemployment. This applies even when the employees are considered independent contractors for IRS purposes.
Texas also has other unusual options for Workers Comp besides obtaining insurance from a private insurance carrier. An employer can purchase workers comp through the State Insurance Fund. An employer can become self-insured or become a member of a group self-insurer authorized by the Board.
Sole-Proprietors and Partners
A sole-proprietorship or a partnership are included for workers' compensation but can elect to be excluded from coverage. LLC Members are included for workers' comp unless they choose to be excluded. Corporate officers even though they may be considered employees are included but may elect to be excluded.
Workers' compensation is not required so there are no penalties for failure to carry coverage. However there are administrative fines for not posting the Notice of No Coverge to Employees in a prominent place. (Section 406.005 Texas Statutes) You must post the Notice each year. It must be posted in English and Spanish and in other applicable languages which employees speak. In addition, business owners should have employees execute a signed and dated copy of the Notice given at hiring in the employees file. There are rules requiring employers to post Notice if they obtain workers' compensation or change coverage.
All businesses start without an experience modification rate. Their effective EMR Rating is 1.00, which is neutral because it does not increase or decrease premium and makes no adjustment to an insurance carriers' workers comp rates. In Texas the Department of Insurance determines the experience rating formula which differs from the other states. Texas includes all of the cost of medical injuries in the experience rating formula. In Texas a business qualifies for an EMR rating when its payroll reaches an amount which generates $10,000.00 in policy premium for the last year of the experience rating period or $5000.00 of policy premium in the last 2 years of the experience rating period.
Learn more about Experience Modification Rates.
Employees have 30 days to report an injury to person in a supervisory or administrative role. Businesses are required to file an Employer’s First Report of Injury with their insurance carrier within 8 days after a work-related injury or death, absence from work for eight days or receipt of Notice of Occupational Disease. The injury must also be reported to the Texas Department of Labor by Filing a First Report of Injury but this is typically handled by your insurance carrier. The Employer must retain the First Report for 18 years. If an employer refuses to file a claim with the carrier, then the employee can file the claim with the Division of Workers' Compensation or obtain and attorney.
How long can an Employee Remain on Workers' Comp after a Claim?
Employers with workers' compensation have some important legal protection. They have immunity from most lawsuits by injured employees. If an employer has workers' compensation insurance, a lawsuit may only go to court after it's been through the Tex Department of Insurance's (TDI) administrative dispute process. The court will consider TDI's recommendations, and only issues in dispute may be used as evidence. Previously resolved issues can't be reintroduced. The employer's insurance company pays attorneys' fees and other defense costs.
Employers without workers' compensation coverage might have to pay punitive damages if they lose a lawsuit. They also lose certain common-law defenses, such as arguing that a) the injured employee's negligence caused the injury, b) the negligence of fellow employees caused the injury, or c) the injured employee knew about the danger and voluntarily accepted it.
Employer that can't find workers' compensation insurance through the voluntary market may buy coverage from Texas Mutual Insurance Company. This is the insurance carrier of last resort in Texas. Texas Mutual has a special program called START for employers who can't find coverage in the voluntary market. This coverage is generally more expensive than coverage bought in the voluntary market. For more information, contact us today.
Injuries that are excluded under the Texas Workers Compensation Act:
TX employers may cancel a policy before its expiration date by notifying the insurance company and DWC by certified mail. The insurance company must refund any unearned premium. Insurance companies may not charge a penalty if you choose to cancel your policy, there may be penalties involved if the policy is subject to retrospective rating or a deductible plan. Be sure to ask about penalties before you cancel a policy. An insurance company may also cancel or refuse to renew a policy. The company must provide advance notice to the policyholder and to DWC by certified mail. Companies must give 10 days' notice if they cancel or nonrenewal a policy because of delinquent premium payments or fraud. Cancellation or nonrenewal for most other reasons requires 30 day notice.
Employers with a premium too low to qualify for experience rating may benefit from the TX premium incentive plan. Businesses with an estimated annual premium of less than $5,000 are eligible for a 10 percent discount if they had no compensable lost-time injuries during the last year. The discount increases to 15 percent if there were no compensable lost-time injuries during the last two years. If there were two or more lost-time injuries in the last year, a 10 percent surcharge is applied.
Texas employers who do not carry workers' compensation insurance coverage are required to report their non-coverage status and work-related injuries or occupational diseases to the Division of Workers' Compensation (DWC). Employers who do carry workers' compensation insurance coverage are required to report all known occupational disease and any work-related injuries that result in more than one day of lost time. Employers that fail to meet these requirements commit an administrative violation and may be subject to administrative penalties.
Any person who knowingly or intentionally makes a false or misleading statement to either deny or obtain workers' compensation benefits or insurance coverage, or who, with such a purpose, misrepresents or conceals a material fact, fabricates, alters, conceals or destroys a material document or conspires to commit such acts commits an administrative violation that may result in a sanction, fine or penalty.
Insurers are encouraged to use premium payment grace periods, temporary premium payment suspension, payment plans, and other actions to allow continuing coverage. Automatic bank drafts may continue, unless a policyholder notifies the carrier of a specific hardship. TDI will work with carriers to minimize regulatory effects of an insurer’s actions to provide policyholder relief, specifically with respect to financial review requirements.
Discretionary order in effect from 03/23/2020 until further notice.
No current state orders.
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Coverage is Paid by Employers
Employers may not charge workers for workers' compensation coverage. There are some exceptions for independent contractors and certain building and construction workers
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Employers liability insurance is an additional layer of coverage included as part of a workers' compensation insurance policy. Employers Liability is known as Part 2 of the policy. It adds two additional coverages for employers:
Employers Legal Liability and Legal Defense Costs
In today's world, there are a variety of reasons employees and third-parties sue employers for damages. Here a some common types covered by employers liability insurance:
Third Party Lawsuits
Your employee sues another party that may have contributed to the injury, In turn, the third party sues your business.
Consequential Bodily Injury
Another party or individual is injured while providing care for the injured employee.
Dual Capacity Legal Action
An employee files a claim but also attempts to sue the employer for being responsible in other ways outside of the employment relationship.
Loss of Consortium
A spouse sues for damages caused by the loss of companionship or relations.
Employers Liability coverage is not included with coverage in the four monopolistic states. Employers in these states can endorse this coverage onto their General Liability policy. That coverage is commonly known as Stop Gap Coverage.
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