How Can There Be a Gap in Workers' Compensation Insurance Coverage?

…if workers' comp insurance coverage does not exist in the first place!

We have argued appropriately that coverage cannot exist based on a lack of insurable interest of the non co-employed employee. Not co-employment, not who was or was not payrolled, someone in the system knowingly committed fraud or else coverage would exist. This is not a “gap”, it is “black and white” in terms of coverage being purchased/provided or not.  The beauty of the workers’ compensation system is “The Great Tradeoff” - if you as the employer buy workers’ compensation (wc), you are protected from suit. Said simply, pay the wc insurance premiums and the employee base will be taken care of to the letter of the law.  In all States and DC (except TX, OK and NJ have opt out provisions), workers’ compensation is a mandatory purchase at certain employee counts (4 + typically).  There is no excuse to be ignorant of the need for workers’ compensation nor to pay the premiums necessary to ensure the proper medical and lost time payments due to an injured worker.  In all States, penalties and misdemeanors/ felonies follow with the lack of purchase of wc. 

In NO state is an industry group targeted as a proposed safety net to those that have failed to purchase insurance and committed fraud.  Instead, the fraudsters have a safety net to take the heat off them for not purchasing wc and doing the right thing in the first place. Since all states manage workers’ compensation differently with their own unique rules and rate sets, it falls upon each State to manage the occupational accident and illness exposure of its citizens.

Every state has some form of “subsequent” or “second injury” fund to make sure the cost of employers to hire prior workers’ comp claimants is offset and affordable.  This form of labor umbrella allows for employees to find gainful employment without putting their employers at increased financial risk based on prior events/claims.

Thirty-nine states/district out of 51 have what is generally known as an “Uninsured Employer Fund” (UEF).  In these states, it is all about making sure the injured worker(s) get treatment and benefits first, with the responsibility of the lack of insurance investigated at the same time with the appropriate parties.  The employer(s) whom were responsible for not buying insurance are held accountable, and most importantly, the claimant gets the benefits they deserve without delay and hopefully litigation.

The following 12 States do not have a Uninsured Employer Fund in order of population:

• Texas (opt outs allowed)
• Florida
• Georgia
• North Carolina
• Indiana
• Alabama
• Louisiana
• Iowa
• Mississippi
• Arkansas
• Nebraska
• Vermont

In these states, for the innocent claimants that have unscrupulous employers that do not wish to purchase workers’ compensation, there is little recourse outside of litigation.  

Not buying Workers' Compensation Insurance is fraud. Go after the perpetrators of the frauds and allow for a safety net for those that should matter the most – those the system is built to serve – the claimants.  An uninsured employer fund makes certain the Florida worker is covered, with the bill to be determined post-investigation.

It should be noted that either the Department of Labor or Department of Insurance of most UEF states are the governing authority and therefore something new would not need to be created.  A few states DCBS’ also handle.

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Contact Professional Employer Organization (PEO) Expert, Paul Hughes

Paul Hughes has been working with the Professional Employer Organization (“PEO”) industry since 1995 and data management since 2005. He is responsible for the day to day operations of both Libertate Insurance Services, LLC and RiskMD, which reports into the overall Ballator Insurance Group family of companies. Learn more about Paul.

Specializing in PEO Services: Workers Compensation, Mergers & Acquisitions, Data Management, Insurance Focus on: Employment Practices Liability (EPLI), Cyber Liability, Health Insurance, Occupational Accident, Business Insurance, Client Company, Casualty, and Disability Insurance.