What Motivates Companies to Carry Traditional Workers’ Compensation Insurance?
When the Texas Department of Insurance researched employer participation in the Texas Workers’ Compensation System in 2004, it discovered
that the primary reason that most employers continued to purchase traditional workers' compensation insurance was a concern about lawsuits.
The second most common reason employers carried traditional workers' compensation insurance was because their industry was considered high
risk. The third top reason employers subscribed to the workers' compensation system was because they needed workers' compensation
insurance in order to obtain government contracts. While the Texas Workers' Compensation Act does not require all private-sector employers to
purchase workers' compensation insurance, it does require workers' compensation for public (governmental) employees. Similarly, if a company
contracts with public entities, it must provide workers' compensation insurance to its employees.
What Motivates Companies to Opt Out of Workers' Compensation Insurance?
According to the Texas Department of Insurance’s research, large employers who choose to not subscribe to the Texas workers' compensation
system opt out because of “high workers’ compensation premium costs and an ability to adequately control medical costs for their work-related
injuries outside of the workers' compensation system.” Smaller employers who opted out, on the other hand, did so because “[the] premiums
were too high, they had too few employees, and they were not required to have workers' compensation insurance by law.” The workers’
compensation system provides employers who carry workers' compensation insurance immunity from lawsuits except in certain circumstances.
Given the uncertainties involved in litigation—and the risk that you could get a runaway jury—workers' compensation insurance is viewed by many
as the safest alternative.
What are the Advantages and Disadvantages of Nonsubscription?
The principal advantage of nonsubscription is the ability to control the costs of treating and returning to work injured employees. The principal
disadvantage of nonsubscription—and the primary reason many companies choose not to opt out—is that the employer may be sued by an
employee who is injured (or allegedly injured) at work. Moreover, when the employer is sued, the employer is prohibited from asserting certain
common-law defenses that otherwise would be available to a defendant in a lawsuit.
copyright © 2008 Donna C. Peavler
| The Pros and Cons of Nonsubscription Why Companies Chose Nonsubscrition |
 | |  | |  | |  | |  | |  | |  |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
 |
 |  |  |  |
| | | |
 |
Texas Nonsubscription. Answering your legal questions...