Workers comp isn’t required in Texas, Do I really need it?

Texas is the only state in our great union that doesn’t require employers in some form to carry workers comp coverage.  Is this good news?

I run across many Texas businesses that choose to go bare.  I hear things like,

 “Hey, my employees work in an office, what’s going to happen?  If someone gets a vicious paper cut, I can write a check to the urgent care center. Problem solved, right?”

Educate Yourself on the Risks

Maybe. As long as you are comfortable with the risks.  What else can happen to your office employees?  Do they ever drive their own vehicles for business purposes?  Ever drive to the bank to do a deposit or make a run to Office Depot?  Ever go on a sales call?  (I know after last quarter’s numbers you sometimes wonder, huh)?  What happens if your employee gets in an at-fault accident and sustains serious injuries? Who pays for hospital stays, medications and lost wages if you don’t have Workers Comp?  Well let’s see:

Health insurance? Nope.  Automobile insurance? No again.  General Liability? Excluded.  You guessed it.  You do!

A Risk Management Axiom 

There is a risk management axiom that you should only retain the level of risk you can pay for. To throw in a little perspective on medical expenses, one of my ten year old twins recently had a little ER visit for doing a head-gravity-ground experiment while playing “touch” football.  We were there for an hour and a half.  The bill…  Over $16,000!  How much for a serious auto accident?  Hundreds of thousands of dollars?  More? Can you write a check for that?

Statutory Compliance

There are a couple of other issues you need to be aware of if you choose to go without workers comp coverage (this is called non-subscription).  If you are a non-subscriber, then you are by law required to file a “Form 5” with Texas Department of Insurance every year.  Failure to do so carries potential administrative penalties and fines. You can get a copy of a form 5 on the TDI website http://www.tdi.state.tx.us/ or shoot me an email  at cbaumli@inspire-insurance.com and I’ll be happy to send you one.

The Realistic Risk 

Perhaps the most realistic exposure to non-subscription is the cost of being sued by an employee for on the job injuries. Even if you are vindicated in court, you will still incur potentially substantial legal fees.  Now my attorney is a nice guy, but at $300 an hour I tend to forgo the chit chat. 

Furthermore if you are sued by an employee for negligence, then you are severely hamstrung in any legal defense you employ because your attorney will not be able to use many common law defenses that are typically critical in defending negligence suits.

The Solution

I’m sure this comes as no surprise, but yes, Workers Comp is a critical component of any viable business insurance program. Having part B of workers comp coverage in place, (called Employer’s Liability) in place prevents these lawsuits from happening because it is the sole remedy in all but a very few cases.

The good news is that the level of workers comp fraud has diminished over the last few years and rates have come down. In fact for office workers annual rates are as low as 35 cents per $100 of payroll.  Make sure you are protected.

We’d love to hear from you at www.inspireinsurancesolutions.com.

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