Does Your Small Business Need Workers Compensation Insurance?

Workers compensation insurance is no-fault insurance that protects workers who are injured on the job or become ill due to a job-related exposure (e.g. to toxic chemicals). In most cases, it also protects employers from lawsuits that might arise from injuries sustained on the job. In exchange for providing a range of benefits to injured employees, employers avoid lengthy and costly legal proceedings to resolve workplace injury claims.

With the exception of employees of the federal government (who are covered by a workers compensation system codified in the Federal Employment Compensation Act ), Workers Compensation insurance is governed by state law.

Who Needs Workers Compensation Insurance?

In most states any business that has even one employee must carry workers compensation insurance. However, there are exceptions. Texas, for example, has no workers compensation requirement, but employers who opt-out of coverage must still report all workplace injuries to the state. Additionally, some states allow employers with only a few employees to avoid buying coverage, and others exempt certain types of employees, such as domestic workers, real estate brokers, agricultural workers, contract workers and casual employees. (For a complete list of state Workers Compensation Laws, see this summary on FindLaw.) But, for the most part, if you are an employer, you must carry Workers Comp. Failure to do so leaves you open to lawsuits and civil penalties, and you may even be charged with a crime.

What Does Workers Compensation Cover?

Workers compensation laws vary considerably by state. That said, most state laws are modeled after the Federal Employment Compensation Act, which provides for partial wage replacement, medical benefits, rehabilitation services and job retraining for federal employees who are injured on the job.

Types of Injuries Covered

As a rule, Worker’s Compensation insurance covers injuries and illnesses that are deemed to be “arising out of employment and during the course of employment.” This includes a wide range of injuries, including those due to:

  • Accidents, such as slips and falls, burns, crush injuries etc.
  • Toxic exposure, such as exposure to benzene, toluene or formaldehyde (Asbestos exposure is covered by a special trust fund.)
  • Repetitive stress injuries such as carpal tunnel syndrome and injuries caused by hand-arm vibration (HAV).
  • Stress-related conditions such as heart disease (in some states)

Additionally, in response to the failure of California’s Workers compensation system to help traumatized victims of the 2015 San Bernardino terrorist attack, the State of California passed a law this year requiring that companies provide immediate advocacy assistance and a shortened review process for victims of acts of workplace terrorism. Other states may soon follow suit.

Types of Injuries Excluded

Not every on-the-job injury will automatically be covered by Workers Compensation insurance. Typically, self-inflicted injuries, injuries that happen during the commission of a crime, or injuries resulting from “horseplay” are not paid. Injuries that happen while a worker was intoxicated or under the influence of drugs are usually excluded as well.

In virtually all cases, the company that issued your Workers Compensation policy will investigate any claim you submit to determine if the injury actually occurred on the job and as a result of the employee fulfilling his role as an employee. This investigation may include a review of all documentation, including medical reports; interviews with the injured employee and any witnesses to the event; background information on those involved in the incident, and more.

What Are Your Responsibilities as an Employer?

In addition to maintaining appropriate Workers Compensation coverage for all eligible employees, employers generally have other responsibilities in regard to workers compensation claims. For example, in most states, you are required to publicly advise employees of their legal rights by posting required information in a place where workers generally congregate (for example, a break room). The notice must include:

  • A summary of the rights of injured employees, including right to prompt medical treatment in the event of an injury
  • A summary of workers compensation benefits
  • The name of the company that provides your Workers Compensation coverage and who entity is responsible for investigating claims. If you are self-insured the notice must state this as well.

Additionally, you must provide injured employees with appropriate claim forms within 24 hours of an on-the-job injury and written information that summarizes their rights under your state’s Workers Compensation laws. This information should also explain how to file a claim.

About The Carmoon Group

The Carmoon Group Ltd. is a minority-owned insurance brokerage headquartered in Hicksville, New York. Through our large network of nationwide affiliates, we offer risk management solutions and comprehensive insurance programs for businesses in a wide range of industries. We have the expertise and experience to provide you optimal coverage at the best possible price. So why not give us a call today to set up an appointment for your insurance review? Or if you prefer, just reach out online and we’ll get back to you at a convenient time.


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