Workers’ Compensation Insurance
When an employer buys a workers’ compensation policy or is certified to self-insure, the insurance company (or a third-party administrator in the case of self-insurance) pays the medical and income benefits due to the employee. No attempt is made to assess blame or determine fault, except under a few circumstances specified by law.
The Texas Property and Casualty Insurance Guaranty Association covers licensed workers’ compensation insurance companies. This means the guaranty association will pay claims if the insurance company becomes financially unable to do so.
Injured employees are entitled to all health care reasonably required to treat the work-related injury or illness. These medical benefits continue for the rest of the injured employee’s life.
Employees who are off work for more than seven days because of a work-related injury may also receive temporary income benefits to replace some of their lost income. Temporary income benefits are calculated as a percentage of the employee’s pre-injury salary, up to a maximum set by law. These benefits are paid while the employee is off work and for a period of time based on the severity of the injury. If a doctor certifies that the injured employee has a permanent impairment, the injured employee may be entitled to impairment income benefits.
These medical and income benefits are the injured employee’s exclusive remedy if the employer participates in the system and is covered by the Texas Workers’ Compensation Act. The only exception is when an employee is killed and the death was caused by the employer’s gross negligence or intentional act or omission.
Being a Nonsubscriber (Not buying insurance coverage)
Nonsubscribers lose several key legal defenses and can face high damage awards if an injured employee can prove in court that the employer was negligent in any way. Employers who choose not to purchase workers’ compensation insurance or who choose to self-insure without obtaining approval from TDI forfeit several common-law defenses if sued because of a work-related injury. These employers may not argue that:
- the employee’s own negligence or the negligence of another worker contributed to the accident
- the employee knew the risk of injury and voluntarily assumed it
In addition to forfeiting these legal defenses, a court could order the employer to pay judgments for pain and suffering and punitive damages.
If a court determines that an employer was negligent in any way – even if the employee’s negligence played a greater role in causing the injury – the employer will likely be held fully financially responsible. The employer also must pay defense-related legal expenses, such as attorney fees.
The following case illustrates the potential cost to a business without workers’ compensation insurance:
An employee of a manufacturer without workers’ compensation insurance slipped and fell at her workstation. The employee sued, alleging that the employer’s negligence had caused her injury. The employer had taken some steps to provide a safe workplace but did not hold safety meetings or give specific safety instructions to its employees. The court ruled that the employer had a duty to provide safety rules and regulations to employees and to ensure that they followed the rules.
Because the employer did not have workers’ compensation insurance, it was barred from using common-law defenses in court. A jury awarded the injured employee damages, and a Texas court of appeals later upheld the verdict.
If the employer had maintained workers’ compensation insurance, the Texas Workers’ Compensation Act would have prohibited the injured employee from suing. The employee’s exclusive remedy would have been the medical and income benefits prescribed by law.