Why Work Comp?
By David Crump
Texas is one of the few states that allow employers to skip Worker’s Compensation insurance protection. Most of the small employers that I encounter are naked on this very important protection for their business. They don’t realize that they are one employee injury away from losing their entire investment.
How Does Worker’s Compensation Protect You?
Insurance is about shifting risk. A Worker’s Compensation policy shifts the risk of a work related injury or illness of an employee from you, the business owner, to the insurance company. Since Work Comp is based on statue (State Law), it is very complete protection. In the unlikely event that a lawsuit attempts to skirt the statue, a Worker’s Compensation policy is matched with Employer Liability Coverage. The price can be high but the protection of your business investment is excellent.
A further protection to the business owner is protection from fraud. There is a high incident of fraud in claims of work related injuries. Most insurance companies that handle this type of contract have fraud investigators that will ferret out false claims.
The trade-off to the hurt employee in the contract is payment for their medical bills, rehabilitation expenses and lost wages from a legitimate work injury or illness. Their rate of compensation is part of the state statue.
What are the Risks of Being Naked on Work Comp?
The Work Comp statue completely strips any legal protection from an employer that opts out of this coverage. You can’t claim any of the common law defenses such as drunk on duty or irresponsible behavior by the employee. Your ability to legally protect your business and save its assets from a lawsuit after a severe employee injury is nil. Your business has unlimited liability to the hurt employee for all the medical bills and potentially their lost income for life. Many lawyers make a good living suing unprotected business owners. Check the phone book for a list.
Here are all real incidents that have happen to my clients to illustrate the employee injury risk:
- One night at the restaurant, a commotion happens in the parking lot. As the assistant manager ran out to investigate, she was nearly run over by a car speeding into the parking lot.
- An armed robbery occurs in another restaurant. As two of the employees flee the premise, both of them trip and fall. One is pregnant and both are hurt. Luckily the injuries were modest and there was no injury to the baby.
- A driver, on a rainy day, slips while exiting the truck cab and injuries his hip. Luckily the hip was bruised and not broken. The medical bill was approx. $10,000 plus lost wages for two months. The driver never returned to work leaving the business shorthanded.
- Driving to a job-site in San Antonio, an employee rear-ends another auto that stops quickly in heavy traffic. The company car is totaled, but the employee is ok.
- The driver of a large truck is drinking vodka while driving and in a drunken rage attempts to ram a passing vehicle. The truck misses the other auto and impacts a tree head-on. The truck is destroyed. Surprisingly, the driver’s injuries are minor.
- A waiter slips on stairs and hyper-extends his knee. The knee injury required surgery and time off work for rehabilitation. Total cost $36,000.
- An electrician helper, working alone, is electrocuted as he is adds a screw to a live conduit at a job-site. He survives but has major, life changing injuries. A large disability award is expected and significant continuing medical bills.
- An assistant manger closes the safe on his finger which causes trauma to the finger. The finger is saved after about $3500 of medical treatment.
All eight of these incidents could have resulted in a business ending lawsuit for employee injuries without Worker’s Compensation Insurance for the business owner.
I have had several of my clients tell me that the cost of Worker’s Compensation would make them noncompetitive — either they work (win bids) or buy work comp (but lose the bids due to price). This is a real dilemma particularly in the construction contractor sector. It is an uneven playing field.
I still must voice the mantra of protection from what I call a critical “business ending risk.” Winning lots of bids won’t save your business from the lawsuit and its huge award settlement after a worker is severely hurt in your employment. It’s a choice to shift the risk of an employee injury or illness. I recommend the safety of insurance protection.