Workers’ compensation is a state-regulated insurance system that ensures medical bills and some lost wages are paid for employees injured on the job. Texas does not require most private employers to have workers’ compensation insurance coverage. Employers not providing workers’ compensation insurance coverage are referred to as non-subscribers.
Non-subscribers lose important legal protections, including immunity from most lawsuits by injured employees. They could also be forced to pay high damage awards if an injured employee can prove in court that the employer was negligent in any way.
If an employer has workers’ compensation insurance coverage, Texas law limits the employer’s liability for work-related injuries. Injured employees may get medical and income benefits set by state law, but generally may not sue their employers.
Texas law requires all employers, with or without workers’ compensation insurance coverage, to comply with reporting and notification requirements under the Texas Workers’ Compensation Act.
Non-subscribers must report that they elect not to obtain workers’ compensation insurance coverage to the Division of Workers’ Compensation (DWC) each year by submitting a DWC Form-005, Employer Notice of No Coverage or Termination of Coverage.
Non-subscribers with five or more employees must report each work-related fatality, occupational disease, and injury that results in more than one day of lost time to the DWC by submitting a DWC Form-007,Employer’s Report of Non-covered Employee’s Occupational Injury or Disease.
Workers’ Compensation Insurance Coverage
When an employer purchases 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 medical and income benefits. Employers who choose to provide workers’ compensation insurance coverage must do so in one of the following ways:
- buy a workers’ compensation insurance policy from an insurance company licensed by the Texas Department of Insurance (TDI);
- be certified by the DWC to self-insure workers’ compensation claims;
- join a self-insurance group that has received a certificate of approval from TDI; or
- be a self-insured governmental entity.
Liability Limits for Workers’ Compensation Subscribers
For employers that provide workers’ compensation insurance coverage, Texas law limits the employer’s liability for work-related injuries of employees. Non-subscribers are not given these legal protections. This means that if an injured employee files suit and is able to prove that the injury was due to the employer’s negligence, the non-subscriber could be subject to high damage awards, including punitive damages and damages for pain and suffering. The employer might also be required to pay defense-related legal expenses, such as attorneys’ fees.
Non-subscribers also lose certain common-law defenses, including:
- the injured employee’s negligence caused the injury;
- the negligence of fellow employees caused the injury; or
- the injured employee knew of the danger and voluntarily accepted it.
Employees covered by workers’ compensation insurance coverage receive benefits based on the type and severity of their injuries. Benefits can include:
- medical benefits for medically necessary treatment of work-related injuries and illnesses;
- disability income benefits for a specified period of time up to a certain dollar limit set by law;
- compensation for burial expenses for employees killed on the job;
- death benefits for dependents of employees killed on the job.
If there is a workers’ compensation claim for benefits, an employee’s family may be entitled to additional benefits if the employee is killed and the death was caused by the employer’s gross negligence or intentional act or omission.
Alternative Coverages are Not Substitutes for Workers’ Compensation Insurance Coverage
Some employers buy accident and health insurance policies or disability policies or create employer indemnification agreements as less costly alternatives to workers’ compensation insurance coverage. Even though these policies may provide benefits to an injured employee, Texas law does not recognize them as substitutes for workers’ compensation insurance coverage. TDI rules prohibit insurance companies from representing that alternative coverages are substitutes for workers’ compensation insurance coverage.
Unlike workers’ compensation insurance coverage, alternative coverages typically have specific policy limits on medical benefits for each covered employee. In addition, alternative coverages usually have shorter maximum payment periods than those provided by Texas workers’ compensation laws.
Employers that buy alternative coverages do not have workers’ compensation liability protections. They may be sued by their injured employees and lose their right to use key common-law defenses in the suit. Moreover, many alternative coverages do not provide coverage for judgments for pain and suffering, punitive damages, and attorneys’ fees.
Unlicensed Companies Providing Workers’ Compensation Insurance
A company must be licensed to provide workers’ compensation insurance. Texas law does not recognize insurance policies sold by unlicensed companies, including those legally selling surplus lines insurance. Surplus lines insurance provides coverage for unusual risks that most licensed companies are unwilling to insure. Companies and agents that sell this kind of insurance must be licensed in their home state or country and authorized to sell surplus lines insurance in Texas.
Employers purchasing workers’ compensation insurance from unlicensed companies do not have the liability protections provided to employers purchasing policies from licensed companies. They may be sued by their injured employees and lose their right to use key common-law defenses in the suit. Moreover, unlicensed companies do not provide coverage for judgments for pain and suffering, punitive damages, and attorneys’ fees.
The Texas Property and Casualty Insurance Guaranty Association, which pays policyholder claims against licensed insurance companies that become insolvent, does not cover unlicensed companies. Claims against unlicensed companies will likely go unpaid if the company becomes insolvent. To find out if a company is licensed, call TDI’s Consumer Help Line at 1-800-252-3439 or 512-676-6282 in Austin between 8 a.m. and 5 p.m., or by viewing company profiles on our website at http://www.tdi.texas.gov.
|Workers´ Compensation||“Alternative” Policy (Employee Retirement Income Security Act (ERISA) Plan)||Unauthorized Insurance Policy/Surplus Lines||No Coverage|
|What determines benefit levels?||Texas law||Court/Alternate dispute resolution||Court/Alternate dispute resolution||Court|
|Who pays medical and lost-income benefits?||Insurance company||Insurance company up to policy limits; employer pays rest||Depends on the policy||Employer|
|Who pays employer’s legal fees?||Insurance company||Governed by the policy terms||Governed by the policy terms||Employer|
|Are benefits protected by a guaranty association?||Yes||Limited||No||No|
|Can an injured employee win judgments for pain and suffering and punitive damages?||No, except in certain circumstances||Yes, up to certain limits||Yes, up to certain limits||Yes, up to certain limits|
Note: Policy terms in unlicensed policies may be unenforceable.
For More Information or Assistance
For answers to general insurance questions, for information about filing an insurance-related complaint, or to report suspected insurance fraud, call the Consumer Help Line at 1-800-252-3439 or 512-676-6282 in Austin between 8 a.m. and 5 p.m., Central time, Monday through Friday, or visit our website athttp://www.tdi.texas.gov.
This publication is a summary and is presented for information purposes only. It is not a substitute for current Texas laws or DWC rules. For current information, view our website or call Customer Assistance at 1-800-252-7031. This publication is not an endorsement by DWC of any service, product, or company.
For more information contact: Public.Information@tdi.texas.gov
As always, it is important to contact a knowledgeable and experienced Texas non subscriber law defense attorney to help you understand your rights as an Employer. James L. Williams of Williams, McClure & Parmelee in Fort Worth, Texas is a veteran employment law and workers’ compensation defense attorney who protects the rights of businesses in Texas employment law and non subscriber cases.
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.