Insurance Explained – Worker-related Insurance

Workers’ Compensation Policy & Employee Liability Coverage – Are They Necessary?

Employee-employer relationships are fundamental in the workplace. Some aspects of these are governed by law, including injuries in the workplace. Where injuries and accidents occur during the course of one’s job, these aspects are covered under Worker’s Compensation and your Employee’s Liability Insurance policies.

Once you employ persons or have volunteers in your business, you need to start looking at your Worker’s Compensation Policy and your Employee’s Liability Insurance. Wondering whether these are necessary and why? Let’s take a look at the state requirements, especially in New Jersey, and what can happen to you and your business if you fail to have either of these policies in place.

New Jersey Workers’ Compensation Requirements

Several states have made workers compensation insurance mandatory. New Jersey is one of them. Where an employer is not covered by federal programs, they must have Worker’s Compensation coverage. According to the New Jersey Business and Industry Association (NJBIA), “Since 1911, the New Jersey Workers’ Compensation Law has provided income and benefits to workers who become sick or injured on the job.”

As per the law, all employers must have Workers’ Compensation insurance. This includes out-of-state employers who enter into a contract of employment in New Jersey or if the work they do is done in NJ.  As long as at least one person is paid to perform services for the business, the company must have workers’ comp. Major corporations can afford to have self-funded insurance schemes. But, for smaller business, non-profits, etc., the easiest way is through private insurance companies.

There are penalties for failure to provide Workers’ Compensation for employees. First, there are state-imposed penalties which cannot be discharged through bankruptcy and can be even assessed directly on corporate officers. Then, where a work-related injury or death occurs, the business is still liable to pay, and where not possible, it falls on the individual directors or partners in the business.

What is Workers’ Compensation Insurance?

Workers’ Compensation Insurance is a necessity to cover job-related injuries or accidents where an employee is involved. The NJ worker’s comp system allows for workers to be reimbursed for:

• Lost wages
• Medical and ongoing treatment
• Death benefits to the families of deceased workers

Lost wages:

An employee becomes eligible for lost wages where the injury sustained on the job makes the worker unable to perform their duties, but that they are expected to recover. The state regulations outline out the maximum temporary disability benefits workers are allowed to claim for.

Medical treatment:

As part of workers’ compensation insurance, the employer is responsible for providing medical treatment for work-related injuries and accidents. Under this, the employer can determine where the employee seeks treatment unless it’s an emergency. The employer must provide all necessary medical treatment to help the worker including glasses, teeth, and even prosthetics/artificial limbs.

Ongoing care:

Work-related injuries can be severe enough that the employee needs ongoing care. This includes surgery, treatment from specialist, rehabilitation. Even if the employee can never return to work, your company will still be liable for these fees. But, you can rest assured that with the right workers’ compensation plan, you will be covered.

Death benefits (aka Survivor Benefits):

If an employee dies because of a work-related incident, the employee’s dependents are entitled to death benefits. The employer is also required to pay the medial, hospital, and burial expenses of the deceased worker.

Why do you need Workers’ Compensation Insurance?

During the normal course of one’s duties in the workplace accidents can happen. This can be as simply as someone lifting a box and hurting their back. They may end up requiring surgery, physical therapy and can even lose some physical functions due to the injury.

Apart from onsite injuries, some workers are required to travel as part of their duties and accidents can happen on the road. So, here again, workers’ compensation insurance is necessary to ensure that the employee gets the care necessary to get back to work where possible.

As part of Workers’ Compensation Insurance is Employer’s Liability Insurance. More often than not, once you purchase workers’ compensation you will often get employer’s liability coverage. The policy will come in two parts. The first part of workers’ compensation is necessary to fulfill New Jersey statutory obligations as per the law. The second part – Employer’s Liability – protects you and your business from additional costs and fees.

What is Employer’s Liability Insurance?

Employer’s Liability Insurance protects employers from suits alleging negligence on the part of the employer which resulted in the workplace injury. For example, a worker may trip and injure himself in a dimly lit stairwell. He can then reasonably argue that the employer was negligent in not providing adequate lighting in the area. Now, you may think that Workers’ Compensation will cover the medical expenses and related fees, and generally it does. But, the employee can sue for additional damages where they can prove negligence by the employer contributed to the injury.

Employer’s Liability Insurance is necessary in this instance to offer protection where the employer is at fault in the accident. It can help to protect your company and assist in surviving a lawsuit as it can cover:

• Attorney fees
• Court costs
• Resulting settlements/judgments

Workers’ Compensation vs. Employer’s Liability 

Employer’s Liability Insurance is normally included as a second part to a Workers’ Compensation Insurance policy. So, the first part of the Workers’ Compensation policy protects the employee by taking care of medical bills and lost wages. The second part then protects the business owner from liability. Without Employer’s Liability Insurance, you could face serious out-of-pocket expenses paying settlements if an injured employee decides to sue and win on the grounds of negligence.

This can be a potentially devastating situation for any business to be in. So, it’s always best to get the right coverage that suits your business once you have employees.

What to do if Employer’s Liability Insurance is not Included in Worker’s Compensation?

Now, if a workers’ compensation policy does not include the second part for employer’s liability, then you can take out a stop gap coverage. As the name suggests, this fills in the gap to make sure your business is also protected. It is an add-on coverage which can be purchased as part of your business general liability insurance.

Is your non-profit exempt?

There are very limited instances where a non-profit company can be exempted from needing worker’s compensation insurance. One way that you may be exempt is where you are the sole owner of the non-profit and you have no paid or volunteer workers.

So, knowing that most states require that you to have Workers’ Compensation and there are plenty of ramifications for not having it, you need to make sure you invest in a proper insurance plan for your business. And, if your Workers’ Compensation Policy does not carry Employee Liability, you need to get that separately so that you aren’t caught flatfooted with unexpected expenses.

Need assistance in finding the right workers’ compensation liability?

Not all Workers’ Compensation Policies are the same and carry similar coverage. You need to understand what your potential liabilities may be and what coverage will best suit your business. Similar to aligning your business risks with the relevant insurance policies, you need to ensure that potential injuries in the workplace or as a result of the job are adequately taken care of to protect you, your directors, and the success of your business. Otherwise, even in bankruptcy, you will not be free of this obligation to pay.

At Treadstone Risk Management, we offer guidance on finding suitable insurance solutions for businesses. We specialize in helping business owners and non-profits find insurance solutions that meet their specific business needs. Where you need to ensure that you meet statutory requirements and protect your business in the process, we offer the right solutions to do so.

If you want to make sure that you have the best workers’ compensation insurance for your business and that your company is fully protected under a robust Employer’s Liability Insurance, then give us a call at Treadstone Risk Management.

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