Back in the not-so-long-ago day, an employee who was injured on the job would have to sue their employer and prove negligence in order to receive any compensation. That means the employee, who was likely already burdened with medical fees, would have to incur legal fees to prove their employer was responsible for, or could have been reasonably expected to prevent, their injury, and that it was sustained in the normal course of business. Cumbersome as you can imagine, this process left countless injured workers to go without timely and much needed support.
Workers’ compensation insurance was phased in during the late 1800s to address this problem. These policies, which became mandatory across Europe and North America post-industrialization, were designed to respond to injuries sustained in the normal course of business, ensuring employees were covered without the need for costly litigation. Under a workers’ compensation policy, employees were promptly paid out for medical expenses and lost wages. In return, employers were shielded from financially and reputationally damaging lawsuits.
Originally called workers’ accident insurance, the new workers’ compensation insurance naturally divided into two coverages that continue to this day. Coverage A, which addresses the immediate needs of injured employees, comes in the form of reimbursed medical expenses and indemnified lost wages. Whether an injury requires a hospital visit or necessitates time off work, Coverage A works to ensure that employees receive the financial support they need. Meanwhile, Coverage B addresses employer liability and offers additional protection for employers. If an employer is found negligent in causing an injury, Coverage B addresses the resulting legal liabilities.
Of course, ambiguous claims can arise. For instance, employees may report injuries that appear to have occurred outside of work, in which case, it may not be fair to penalize the employer for the incident.
Under the old system, which favored the employer, a claim like this would need to be substantiated by the employee before it was accepted as fact. Under the new system, the claim is presumed to be fact until proven otherwise. You might think the burden of proof would fall on the employer, which under a non-insurance structure, it would. However, because the workers’ compensation insurance system is designed to protect employees and employers equally, the burden of proof now falls on the insurance carrier to demonstrate a claim is fraudulent.
Employees whose claims are proven fraudulent are heavily penalized in order to preserve the integrity of the workers’ compensation insurance system, and they may face hefty fines. If the claim is not deemed fraudulent, the employer will be buffered from legal liability, but an increase in premiums may apply to reflect the increased likelihood of an employee making a valid claim.
Because it is in everyone’s best interest to minimize claims, keep insurance premiums down, and keep employees safe, the relationship between insured businesses and their insurers has changed over the years. Insurance companies, particularly brokers like Nesbit Agencies, have enhanced their offerings through the addition of loss control measures. These measures include analyzing data and sharing best practices with employers to help prevent workplace injuries.
By working with your insurance advisor to implement safety programs, maintain active safety committees, and foster a culture of safety, you can significantly reduce the risk of a workplace injury taking place. In turn, a clean claims history will lower premiums because your insurance carrier will always evaluate factors such as health plans and return-to-work programs when pricing your policies.
Engaged management and a proactive approach to safety is better way overall to control cost, but at the end of the day, our primary objective is to ensure that employees return home from each shift in the same condition they were in when they arrived.
If you are a business with employees, even just one employee, it is mandatory for you to carry workers’ compensation insurance. The exception to this rule is family-owned businesses, where family members who work in the business are allowed to opt out of the standardized coverages. If you are a family member working in a family-owned business, bear in mind that opting out of workers’ compensation coverage means you will be responsible for covering your own medical fees and lost wages in the event you do suffer a workplace injury.
We recommend addressing these risks carefully with your insurance advisor before making the decision to opt out. You may realize investing in those premiums has the potential to yield a far greater return.
The risks of not carrying workers’ compensation insurance are significant, especially for employers who allow their coverage to lapse. While some businesses have the option to opt out, those who don’t will face daily penalties for the duration of any gap. Furthermore, if an injury occurs during this uninsured period, you as the employer are fully responsible for all injury-related expenses.
Your friends at Nesbit Agencies do not want to see you fined or see your small business suffer under the weight of medical expenses, legal fees, and lost wages. We want to work with you to protect yourself and your team to make your workplace happy, healthy, and incident-free. Whether you are new to workers’ compensation insurance, looking to review your policy, or hoping to find ways to reduce your premiums through proactive measures, we’ve got your back.
Call in with your questions or book an appointment with us today to get started.
