Exclusive Remedy & Workers Compensation

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The Biggest Misconception

Most states require worker’s compensation insurance, also referred to as worker’s comp. Every state has a unique set of guidelines and rules determining which employers need to carry worker’s compensation. Unfortunately, plenty of businesses buy it to remain compliant and don’t fully understand the coverage.

Many businesses think they only need worker’s compensation to pay for medical expenses and time off for injured employees. While that is true, there is another significant benefit of worker’s compensation insurance: the exclusive remedy provision.

What Is The Exclusive Remedy?

The exclusive remedy provision protects employers from being sued by employees injured on the job. If the injured employee is already receiving benefits from the worker’s compensation policy (medical payments and lost wages); they cannot claim any additional benefits like a lawsuit settlement. The purpose of the exclusive remedy is to minimize the number of irrelevant lawsuits. It saves both the business and courts time and money.

Exceptions to Exclusive Remedy

While the exclusive remedy is beneficial, there are a few exceptions to the law businesses need to be aware of. The list of exceptions varies by state, but here are some of the most common exceptions:

  • No insurance in place - Injured employees can sue businesses that have no worker’s compensation in place at the time of injury. Lawsuits can include claims for damages associated with medical payments, lost wages, and pain and suffering.
  • Insurance fraud - Employers that lie or try to hide the truth about injured employees to their worker’s compensation carrier are committing insurance fraud. In these instances, they relinquish their protection under the exclusive remedy provision and can be sued by an injured employee.
  • Injuries caused by third-parties - Depending on the nature of the business, employees may work with third-parties, like contractors, or use equipment purchased from a third-party. If the third-party is responsible for the injury, the employee can file a personal injury lawsuit.
  • Employee negligence - Employees can also file a lawsuit when they believe their employer was negligent. Employer negligence usually means the employer failed to provide a safe environment for the employee.

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Steps Small Businesses Can Take

The exclusive remedy provision isn’t guaranteed protection for businesses. There are steps they can take to assure the exclusive remedy remains relevant when an employee injury occurs.

  • Renew worker’s compensation insurance - Businesses need to pay their worker’s compensation premiums on time to avoid cancellation. If possible, they should set payments on auto-pay to assure all premiums are sent in a timely fashion.
  • Conduct employee safety training - One of the biggest causes of worker’s compensation claims is lack of training or safety prevention. Worker’s compensation claims dropped 60% during OSHA’s first forty years in existence, proving that employee safety programs work.
  • Assess the work environment - Work environments rarely remain the same day today. Businesses need to create a safety inspection policy that is conducted consistently to identify hazards and concerns.
  • Be honest - Companies need to follow an honesty protocol to avoid insurance fraud and unnecessary lawsuits.

Business Insurance

Running a business is challenging enough without having to worry about lawsuits, employee injuries or property damage. Having the right insurance gives you the peace of mind to focus on what matters - running your business.

The coverage you need depends on the type of business you run. A restaurant owner needs to be covered against customers possibly getting food poisoning while an accountant needs to be covered against calculation errors. CoverWallet's intelligent assessment system will identify the insurance you need based on your specific business, get you a policy that fits your budget, and do it all in less time than you think.

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