Use a pay-as-you-go workers’ comp policy, not one based on estimated annual payroll.
The Year-End Audit Bill That Almost Bankrupted Me
I started my construction business and bought a traditional workers’ comp policy. I had to estimate my annual payroll, and I guessed low to keep my upfront premium down. But we had a great year and my payroll was double my estimate. At the end of the year, the auditor came. I was hit with a massive, lump-sum bill for the extra premium I owed. I almost didn’t have the cash to pay it. A “pay-as-you-go” policy, which syncs with my actual payroll runs, would have let me pay the correct premium each month, avoiding that terrifying year-end surprise.
Stop classifying employees as independent contractors to avoid premiums. Do it correctly to avoid massive fines and uncovered claims.
The “Contractor” Who Fell and Cost Me Everything
To save money, I treated my long-term carpenter as an independent contractor, paying him on a 1099. I didn’t pay workers’ comp premiums for him. He fell from a ladder on my job site and was seriously injured. The state investigated and ruled he was my employee, not a contractor. I was hit with huge fines for misclassification and was personally on the hook for his massive medical bills and lost wages because I had no insurance to cover him. That “savings” was the most expensive business decision I ever made.
Stop thinking workers’ comp is your only exposure. Do get Employer’s Liability Insurance (Part B) to cover lawsuits.
The Injury Was Covered. The Lawsuit Was Not (at first).
An employee was injured, and our workers’ comp (Part A) paid for his medical bills. We thought that was the end of it. But then, the employee’s spouse sued our company, claiming her husband’s injury was due to our gross negligence. This was a separate lawsuit that workers’ comp didn’t cover. Thankfully, our policy included Employer’s Liability (Part B), which is designed for exactly these situations. It hired lawyers to defend us. Without Part B, we would have been on our own against a devastating lawsuit.
The #1 secret for controlling workers’ comp costs is implementing a documented safety program.
The Handbook That Paid for Itself Ten Times Over
Our workers’ comp premiums were climbing every year. We finally invested in a formal, written safety program, with mandatory monthly training and documented inspections. Our number of claims dropped by half. At our next renewal, our “experience modifier” was so much better that our premium decreased by 25%. The money we spent on the safety program was paid back tenfold in reduced insurance costs. It was the single best investment we ever made, not just for our employees’ well-being, but for our company’s bottom line.
I’m just going to say it: The “exclusive remedy” protection of workers’ comp is not absolute, and you can still be sued.
The “Immunity” That Vanished in Court
An employee was badly injured by a piece of equipment whose safety guard we had intentionally removed to make it run faster. Our workers’ comp policy paid his medical bills. We thought this “exclusive remedy” provision made us immune from a lawsuit. We were wrong. He sued us, claiming our “intentional and willful misconduct” created an unsafe workplace. The court agreed, and the exclusive remedy protection was pierced. Only the Employer’s Liability (Part B) portion of our policy could defend us from that lawsuit. That immunity has big exceptions.
The reason a mental stress claim was denied is because there was no accompanying physical injury.
The Stress That Broke My Employee’s Mind, but Not His Body
An employee suffered a severe mental breakdown, which his doctor attributed to extreme workplace stress. He filed a workers’ comp claim. It was denied. In our state, a “mental-mental” claim—where a mental stressor leads to a mental injury—is not compensable unless it was caused by a sudden, shocking event. If the stress had caused a physical injury, like a heart attack (a “mental-physical” claim), it would have been covered. But because the injury was purely psychological, our policy was not required to pay.
If you’re still not reporting injuries immediately, you’re creating a reason for the insurer to deny the claim.
The “Minor” Injury and the Major Delay
An employee strained his back but didn’t report it, thinking it would get better. A month later, the pain was unbearable, and he finally filed a claim. The workers’ comp insurer was immediately suspicious. The long delay between the date of injury and the date of reporting was a huge red flag for potential fraud. The claim was delayed for months while they investigated. If he had reported the “minor” strain on the day it happened, the entire process would have been smooth, simple, and fast.
The biggest lie you’ve been told is that workers’ comp covers injuries that happen during a commute. (It’s the “coming and going” rule).
The Car Crash on the Way to Work That Wasn’t a Work Injury
Our employee was in a car accident while driving to the office in the morning. He tried to file a workers’ comp claim, assuming his commute was part of his job. The claim was denied. Most states have a “coming and going” rule, which says that injuries sustained during a normal commute are not considered to have occurred in the “course and scope” of employment. The workday, and the workers’ comp coverage, doesn’t start until the employee is actually on the clock at the place of business.
I wish I knew how much a bad experience modification rate (E-Mod) would increase my premiums for years to come.
The Claim That Haunted Us for Three Years
We had a bad year with a couple of significant employee injuries. Our insurer paid the claims. At our next renewal, our “Experience Modification Rate” (E-Mod), a multiplier based on our claims history, shot up from a credit to a debit. Our workers’ comp premium increased by 40%. We learned that the E-Mod is based on a three-year rolling average. That one bad year of claims continued to penalize us with higher premiums for the next three years. It was a long and expensive lesson in the power of that one number.
99% of business owners make this one mistake: not having a formal return-to-work program for injured employees.
The Employee We Brought Back to Work and the Money We Saved
An employee was out with a back injury. Our doctor said he couldn’t do his old job but could do light-duty office work. We created a temporary position for him. By bringing him back to work, we stopped the “lost time” portion of his claim, which was the most expensive part. This single action significantly reduced the total cost of the claim and helped lower our E-Mod in the long run. A formal return-to-work program is the most powerful tool a business has to control its workers’ comp costs.
This one small action of properly classifying your employees by their job duties will prevent a huge audit bill.
The Audit That Cost Us a Fortune
To save money, we classified our highly-paid welders under the same, lower-risk code as our clerical office staff. We thought we could get away with it. At the end of the year, the workers’ comp auditor came. He took one look at our operations and reclassified everyone correctly. We were hit with a massive bill for the back-premiums we owed, plus a hefty fine. Misclassification is a short-term gamble that always leads to a long-term, expensive penalty. Honesty and accuracy from the start is the only smart strategy.
Use a policy with a dividend plan, not just a standard policy, if you have a good safety record.
The Check We Got Back for Being Safe
We have a great safety record and very few claims. Our agent suggested we switch to a workers’ comp carrier that offered a “dividend plan.” We paid our regular premium all year. At the end of the year, because the insurance company had a profitable year and our individual claims were low, they sent us a check back—a dividend—for a portion of the premium we had paid. It was a direct financial reward for our commitment to safety. Not all companies offer it, but for a safe business, it’s like found money.
Stop thinking your policy covers injuries to a non-employee, like a customer or vendor. That’s general liability.
The Customer Who Slipped and the Wrong Policy I Called
A customer slipped on a wet floor in our store and was injured. I immediately called our workers’ compensation insurer to report the claim. They politely informed me that they were the wrong company to call. Workers’ comp insurance is exclusively for injuries to your own employees. Injuries to third parties, like customers, vendors, or the public, are covered by a completely different policy: your Commercial General Liability insurance. Understanding this basic division of risk is the first step in knowing who to call when something goes wrong.
Stop assuming your policy covers injuries at a company-sponsored social event if attendance wasn’t mandatory.
The Company Picnic and the Uninsured Injury
We held our annual company picnic at a local park. Attendance was voluntary. An employee broke his ankle during a softball game and tried to file a workers’ comp claim. It was denied. The court in our state had ruled that for an injury at a social event to be covered, the employer must derive a significant, direct benefit from the event, and attendance must be mandatory or strongly encouraged. Because our picnic was purely for morale and was voluntary, the injury was not considered to have happened in the course of employment.
The #1 tip for a claim is to show you provided immediate and appropriate medical care.
The First Aid Kit and the Smooth Claim
An employee cut his hand on the job. Our supervisor, who was trained in first aid, immediately rendered aid, cleaned the wound, and then drove the employee to a designated occupational health clinic for professional care. We documented every step. When we submitted the workers’ comp claim, our swift and appropriate response showed the insurer we were a responsible employer who took injuries seriously. This proactive approach to care not only helped our employee but also made the entire claims process faster and smoother, with fewer questions from the insurer.
I’m just going to say it: Workers’ comp fraud by employees is real, but fraud by employers (misclassification) is a much bigger problem.
The Real Criminals in the System
We hear a lot about the one-in-a-million employee who fakes an injury to get workers’ comp. And yes, it happens. But a far more common and costly problem is employer fraud. It’s the construction company that deliberately misclassifies its roofers as “clerical staff” to get a lower premium. It’s the company that pays employees in cash, under the table, to hide their true payroll. This type of fraud is rampant, and it shifts billions of dollars of cost onto the honest businesses who are playing by the rules.
The reason a repetitive stress injury claim (like carpal tunnel) was denied is that the employee couldn’t prove it was work-related.
The Injury That Happened Everywhere and Nowhere
Our office manager developed carpal tunnel syndrome and filed a workers’ comp claim. It was denied. The insurer argued that while her condition was real, she could not definitively prove it was caused by her work typing and not by her hobbies, like knitting or playing video games at home. For a repetitive stress injury, which develops over time, the burden of proof is on the employee to show that their work duties were the primary cause. Without a clear link, these claims are often very difficult to win.
If you’re still not getting certificates of insurance from your subcontractors, you’ll be paying for their injured employees.
The Uninsured Subcontractor and the Bill That Became Mine
I hired a roofing subcontractor for a job. I didn’t ask him for a certificate of insurance. One of his employees fell off the roof and was seriously injured. The subcontractor had let his own workers’ comp policy lapse. Under the law in my state, as the general contractor, I was held responsible. The injured worker’s claim was filed against my workers’ comp policy. My E-Mod went through the roof, and my premiums skyrocketed for years. That one missing piece of paper cost my company tens of thousands of dollars.
The biggest lie is that your premium is non-negotiable. It’s directly tied to your payroll, classifications, and safety record.
The Three Levers That Control Your Premium
For years, I thought my workers’ comp premium was a fixed price I just had to accept. I was wrong. It’s a formula, and I have control over the inputs. I can control my payroll by managing overtime. I can control my classifications by ensuring my employees are coded correctly. And most importantly, I can control my safety record by investing in training and creating a safe workplace, which directly impacts my E-Mod. The premium isn’t a fixed price; it’s a dynamic number that directly reflects how well I manage my business.
I wish I knew that my policy wouldn’t cover an employee who was injured while intoxicated or committing a crime.
The Drunken Fall That Wasn’t a Work Injury
An employee came back to our warehouse drunk after his lunch break. He fell off a forklift and was injured. He filed a workers’ comp claim. It was denied. The investigation, including a blood alcohol test, showed he was intoxicated. Our state’s workers’ comp law has a specific exclusion for injuries that are the direct result of an employee’s intoxication or their attempt to commit a crime on the job. His decision to come to work drunk had created a situation where his injury was no longer the company’s responsibility.
99% of employers don’t know the specific rules for their state, as workers’ comp is state-mandated.
The State Line and the Different Rulebook
Our business is based in Texas, but we hired a remote employee who lives and works in California. When she was injured, we discovered that California’s workers’ compensation laws, which are famously employee-friendly, applied to her claim, not the laws of Texas. Workers’ comp is a state-level system, and every state has its own unique rules, deadlines, and benefit amounts. We had to navigate a completely different and more complex system because we didn’t understand that the law of the employee’s location is the one that matters.
This one habit of documenting every step of a claim investigation will protect you from a lawsuit.
The Investigation File That Was Our Best Defense
When an employee filed a questionable claim, we immediately started an investigation file. We took photos of the scene. We got written statements from all the witnesses. We documented every conversation we had with the employee. A year later, when the employee sued us, alleging we had handled his claim in bad faith, we had a perfect, contemporaneous record of our entire investigation. That file demonstrated that we had taken the claim seriously and acted reasonably at every step. It was the key to getting the lawsuit dismissed.
Use your state’s drug-free workplace program to earn a discount on your premium.
The Easiest 5% I Ever Saved
I discovered that my state offered a “Drug-Free Workplace” certification. To qualify, we had to implement a formal drug-free policy, conduct some employee training, and put up a few posters. It was a bit of paperwork, but it was straightforward. Once we were certified, we submitted the certificate to our workers’ comp insurer. They immediately applied a mandatory 5% discount to our annual premium. It was one of the easiest and most direct ways to lower our insurance costs while also creating a safer workplace for our employees.
Stop assuming your policy covers you if you have employees working out of state. You need an “all states” endorsement.
The Employee in a State Where We Had No Coverage
Our company is based in Illinois. We hired a new salesperson who worked from his home in Georgia. When he was injured, we discovered a huge problem. Our workers’ comp policy was only written for the state of Illinois. We had no legal coverage for him in Georgia. We had to scramble and pay a huge penalty to get the right coverage in place. We learned we needed an “All States” endorsement, which provides flexibility and ensures our employees are covered no matter where they are located.
Stop thinking that a minor injury doesn’t need to be reported. It can develop into a major claim later.
The “Tweak” in the Back That Became a Major Surgery
An employee felt a small “tweak” in his back while lifting a box. He didn’t think it was a big deal, so he didn’t report it. He kept working, and over the next few weeks, the pain got progressively worse. He had ruptured a disk. When he finally filed the claim, the insurer was skeptical because of the delay. What started as a minor, no-lost-time injury had developed into a major, six-figure surgical claim. Reporting every single injury, no matter how minor, is the only way to protect both the employee and the company.
The #1 secret is that Employer’s Liability (Part B) is the most critical part of the policy for protecting the business itself.
The Lawsuit That Came After the Claim
An employee was seriously injured. Our workers’ comp policy (Part A) dutifully paid all of his medical bills and lost wages. Then, his family filed a separate lawsuit against our company, claiming our negligence had caused him to lose their consortium and support. This type of lawsuit is not covered by Part A. It is only covered by Part B: Employer’s Liability. Part A protects the employee; Part B protects the company from the lawsuits that can come after the injury. It is the most important, and most overlooked, part of the policy.
I’m just going to say it: The annual workers’ comp audit is designed to find ways to charge you more money.
The Auditor Who Was a Financial Detective
I used to think our annual workers’ comp audit was a simple verification of our payroll. It’s not. The auditor is a financial detective, and their job is to find any reason to increase your premium. They will scrutinize your employee classifications, challenge your subcontractor certificates, and add back any payroll you might have missed. They are not there to help you save money. They work for the insurance company, and their goal is to ensure that the insurer has collected every single premium dollar that they are legally entitled to. You need to be prepared and organized.
The reason a claim was denied is that the injury resulted from horseplay or a deviation from job duties.
The Prank That Went Wrong and Wasn’t a Work Injury
Two employees were goofing around in the warehouse, and one of them pushed the other, who fell and broke his arm. The injured employee filed a workers’ comp claim. It was denied. The investigation showed the injury was a direct result of “horseplay” and a significant deviation from his normal work duties. The injury did not “arise out of and in the course of employment.” It arose out of a personal prank. The company was not responsible for an injury that occurred when the employees were not actually working.
If you’re still not providing proper safety equipment (PPE), you’re opening yourself up to a “willful misconduct” lawsuit from an employee.
The Missing Safety Goggles and the Lawsuit That Followed
We had a company policy that required safety goggles in the workshop, but we were lax about enforcing it. An employee who wasn’t wearing his goggles suffered a serious eye injury. Our workers’ comp paid his medical bills. But then he filed a separate lawsuit against us, alleging “willful and serious misconduct.” He claimed our failure to enforce our own safety rule pierced the immunity of workers’ comp. He won. Our failure to provide and enforce the use of PPE turned a standard claim into a much more expensive lawsuit.
The biggest lie is that you don’t need workers’ comp for part-time or temporary employees.
The “Temp” Who Was a Permanent Liability
We hired a college student for a temporary, part-time summer job. We didn’t think we needed to include her on our workers’ comp policy. On her second day, she tripped and fell, breaking her wrist. We quickly learned that in our state, the law makes no distinction between full-time, part-time, or temporary employees. If they are on your payroll, they are your employee, and you are required to cover them. Our misunderstanding of the law resulted in a big fine and an uncovered medical claim.
I wish I knew that corporate officers could sometimes opt-out of coverage, but it’s often a bad idea.
The CEO Who Opted Out and Paid His Own Medical Bills
As the owner and sole corporate officer, my state law allowed me to exempt myself from our workers’ comp policy to save a little money on the premium. I thought it was a smart move. A year later, I was injured while visiting one of our job sites. My personal health insurance denied the claim, stating it was a work-related injury. But I had no workers’ comp coverage. I was stuck in a massive, uninsured gray area and had to pay all of my own medical bills. It was a foolish and expensive way to save a few hundred dollars.
99% of businesses don’t realize their health insurance will deny a claim for a work-related injury.
The Two Policies That Pointed Fingers at Each Other
An employee hurt his back at work. He went to the doctor and submitted the claim to his personal health insurance. The health insurer denied the claim, stating that they have an exclusion for any injury that occurs in the course and scope of employment. They told him to file it with his employer’s workers’ compensation policy. There is a hard and fast line between the two types of insurance. Health insurance is for your personal life. Workers’ comp is for your professional life. And they will not cross that line.
This one small action of creating a clear, written safety manual will be your best defense.
The Manual That Won the Lawsuit
An employee was injured and sued us, claiming we had failed to provide a safe workplace. In our defense, our lawyer presented our detailed, written safety manual. He showed the court the specific safety rule that the employee had violated. He then showed the employee’s signed acknowledgment form, proving he had received and understood the manual. The manual was the key piece of evidence that demonstrated we had a clear, established safety program. It was our best defense and was instrumental in getting the case dismissed.
Use a captive insurance program for workers’ comp if you’re a large enough company, not just the standard market.
The Day We Became Our Own Insurance Company
Our company had grown to a size where our workers’ comp premiums were huge, but our safety record was excellent. We were paying for the losses of less-safe companies in the standard insurance pool. Our risk manager suggested we join a “group captive.” We pooled our resources with other, similar safe companies to form our own insurance company. We had more control over our claims and safety programs. And at the end of the year, the underwriting profits that used to go to the big insurer were returned to us as dividends.
Stop assuming that volunteers are covered by your workers’ comp policy.
The Good Deed and the Uninsured Injury
Our non-profit organization had a “volunteer day” to help clean up a local park. One of our dedicated volunteers was seriously injured during the event. She was unable to work at her regular job for months. We were all devastated to learn that our workers’ compensation policy did not cover her. The policy is for employees on payroll, not for volunteers. To protect our volunteers, we would have needed to purchase a separate, specific volunteer accident insurance policy. Her good deed had resulted in a devastating, uninsured loss of income for her.
Stop thinking that an injury that happens during a lunch break is always covered. (It depends if it was on-premises).
The Sandwich and the Slip-and-Fall
An employee slipped and fell in our company cafeteria during his unpaid lunch break. The claim was covered. A week later, another employee was hit by a car while walking to a sandwich shop on his unpaid lunch break. That claim was denied. We learned the subtle distinction. If the injury occurs on the employer’s premises, even during a break, it is generally covered. If the employee leaves the premises for a personal break, their workers’ comp coverage is temporarily suspended until they return.
The #1 tip for a lower E-Mod is to focus on preventing small, frequent claims, which impact it more than one large claim.
The Death by a Thousand Paper Cuts
In one year, our company had one single, catastrophic claim that cost $200,000. Our E-Mod went up a little. The next year, we had ten small claims that totaled only $20,000. Our E-Mod skyrocketed. We learned that the E-Mod formula is designed to heavily penalize claim frequency more than claim severity. The logic is that lots of small claims are a sign of a systemic safety problem. To keep your E-Mod low, the single most important thing you can do is focus on eliminating the small, preventable, everyday injuries.
I’m just going to say it: The whole system of using independent contractors is a way to shift the burden of injuries onto the worker.
The “Freedom” of Being a Contractor and the Burden of an Injury
For years, I worked as an independent contractor for a large company. I loved the “freedom.” Then I was seriously injured on their job site. The company’s response? “You’re not our employee. You’re on your own.” I had no health insurance, and I couldn’t get workers’ comp. The medical bills and my inability to work destroyed me financially. I realized that the “independent contractor” model is a brilliant strategy for companies to shift the entire cost and risk of workplace injuries from their corporate insurance to the uninsured back of the individual worker.
The reason a hearing loss claim was denied is that it couldn’t be definitively tied to workplace noise over other factors.
The Factory Noise vs. The Rock Concerts
An employee who had worked in our noisy factory for 30 years filed a workers’ comp claim for hearing loss. It was denied. During the investigation, the insurer discovered he was also an avid hunter and attended loud rock concerts. They argued that they could not definitively prove that his hearing loss was a result of his occupational noise exposure and not his recreational noise exposure. For a gradual, cumulative condition like hearing loss, the burden of proof is on the employee to show that work was the primary contributing factor.
If you’re still hiring uninsured contractors, you are legally considered their employer if they get hurt on your job site.
The “Contractor” Who Became My Employee the Day He Fell
I hired an independent contractor to do some repairs at my business. I didn’t ask for his proof of workers’ compensation insurance. He fell off a ladder and broke his leg. Because he had no insurance of his own, the law in my state automatically deemed me to be his “statutory employer.” His injury became my legal responsibility. I was forced to pay his medical bills and lost wages, and I was hit with a huge fine for hiring an uninsured worker. His fall made him my employee, and his bill became my problem.
The biggest lie is that workers’ comp is “no-fault.” An insurer will still fight hard to deny a questionable claim.
The “No-Fault” System and the Six-Month Investigation
The term “no-fault” simply means that the employee doesn’t have to prove their employer was negligent to get benefits. It does not mean the insurance company will automatically pay every claim without question. When an employee filed a claim for a back injury with no clear accident or witnesses, the insurer launched a six-month investigation. They interviewed everyone, subpoenaed his medical records, and put him under surveillance. The “no-fault” system just gets you in the door; it doesn’t stop the insurer from fighting tooth and nail to deny a claim they believe is questionable.
I wish I knew that I needed to post the official state workers’ comp notice in a visible place for employees.
The Poster I Forgot That Led to a Fine
I thought I had all my bases covered with my workers’ comp policy. Then, a state inspector came to my office for a routine visit. He looked around and asked me where my official workers’ compensation notice was posted. I didn’t have one. It’s a legal requirement in my state to post a specific notice in a place where all employees can see it, informing them of their rights. My simple failure to print out and hang up a single piece of paper resulted in a fine. It was an easy rule that I didn’t even know existed.
99% of business owners don’t understand the difference between “medical only” and “lost time” claims.
The Two Types of Claims and Their Very Different Costs
We had an employee who cut his hand and needed stitches. He was back at work the next day. This was a “medical only” claim. The cost was low. A few months later, an employee hurt his back and was out of work for six weeks. This was a “lost time” claim. The cost was huge, because it included not just the medical bills, but also a portion of his lost wages. These “lost time” claims are the ones that have a massive impact on your E-Mod and your future premiums.
This one habit of holding regular safety meetings will lower your risk and premiums.
The 15-Minute Meeting That Saved Us a Fortune
Every Monday morning, we have a mandatory, 15-minute safety meeting on our production floor. We talk about a specific hazard, review any recent incidents, and get feedback from the employees. This simple, consistent habit has created a powerful safety culture. Our number of accidents has plummeted. Our E-Mod is now one of the best in our industry, which saves us tens of thousands of dollars a year in workers’ comp premiums. That weekly 15-minute meeting is the single most profitable thing we do.
Use a reputable PEO (Professional Employer Organization) to handle your workers’ comp if you’re a small business.
The Day I Outsourced My HR and Insurance Headaches
As a small business owner, I was struggling to keep up with payroll, HR compliance, and the complexities of workers’ comp insurance. I decided to partner with a Professional Employer Organization (PEO). They became the “employer of record” for my staff. They handled all the payroll, and I was able to join their large-group workers’ comp policy, which gave me access to better rates than I could get on my own. It freed up my time and saved me money, letting me focus on running my business, not on being an HR expert.
Stop assuming your policy covers injuries to your domestic employees (like a nanny). You need a separate endorsement.
The Nanny and the Uninsured Fall
We hired a full-time nanny to care for our children in our home. We had a great homeowner’s insurance policy and assumed we were covered. When our nanny fell and broke her arm, we learned a hard lesson. In our state, a domestic employee who works over a certain number of hours a week must be covered by a workers’ compensation policy. Our homeowner’s policy specifically excluded this. We had to pay her medical bills and lost wages out of pocket and were fined by the state for non-compliance.
Stop thinking that you can fire an employee for filing a workers’ comp claim. That’s illegal retaliation.
The Firing That Led to a Second, More Expensive Lawsuit
An employee filed a workers’ comp claim that I thought was fraudulent. I was angry, so I fired him. That was a catastrophic mistake. He hired a lawyer and filed a second lawsuit against me for “retaliatory discharge,” which is illegal. The workers’ comp claim was one thing, but the retaliation lawsuit was much more expensive and damaging to my company’s reputation. You absolutely cannot fire someone for exercising their legal right to file a claim, even if you believe the claim is baseless.
The #1 secret is that a good return-to-work program is the fastest way to close a claim and lower your costs.
Getting Our Injured Employee Back in the Building
Our best machinist was out with a shoulder injury. He couldn’t do his normal job, but he was going stir crazy at home. We worked with his doctor to create a temporary, light-duty position for him, helping with inventory and quality control in the office. By bringing him back to work, we stopped the bleeding of the expensive “lost time” benefits. It also kept him engaged with the company and helped him recover faster. That return-to-work program was the single most effective tool we had for controlling the cost of the claim.
I’m just going to say it: Navigating a workers’ comp claim is a bureaucratic nightmare for both the employee and the employer.
The Maze of Paperwork, Doctors, and Deadlines
When my employee was injured, I thought the process would be simple. I was wrong. We were both thrown into a bureaucratic maze. There were endless forms, strict deadlines, disputes over which doctor he could see, and confusing letters from the insurance company. It was a full-time job for me to manage the process for my company, and it was a full-time nightmare for my injured employee. The system, with all of its rules and procedures, often feels like it creates more frustration than it does healing.
The reason a claim was denied is that the employee had a pre-existing condition that they failed to disclose.
The Old Football Injury That Tackled a New Claim
An employee hurt his knee at work. During the claim investigation, the insurer subpoenaed his medical records. They discovered he had a major, surgical repair on that same knee from a college football injury a decade ago, which he had not mentioned on his post-hire medical questionnaire. The insurer denied the new claim, arguing it was an aggravation of a pre-existing condition that he had failed to disclose. His old injury from the football field was used to deny him coverage for a new injury on our factory floor.
If you’re still not properly documenting employee training, you can’t prove you taught them to do the job safely.
The Training We Did That We Couldn’t Prove
An employee was injured and claimed he had never been properly trained on how to use a particular machine. We knew we had trained him, but we had no proof. We didn’t keep training logs, and we didn’t have him sign a form acknowledging he had completed the training. It became his word against ours. The lack of documentation made our defense much weaker. Now, we have a “Safety Training Acknowledgment Form” that every employee signs after every single training session. It’s a simple piece of paper that creates a powerful record.
The biggest lie is that as the owner, you’re automatically excluded. In many states, you’re included by default.
The Injury I Thought I Wasn’t Covered For
I’m the sole owner of my LLC. I was injured on the job, and I assumed I wasn’t covered by my own workers’ comp policy. I was wrong. In my state, owners and corporate officers are automatically included for coverage unless they file a specific form to exclude themselves. Because I had never filed the exclusion form, I was an employee of my own company. My workers’ comp policy covered all of my medical bills and lost wages. It was a surprising and very welcome discovery.
I wish I knew how to read an E-Mod worksheet to see how my claims were affecting my premium.
The Code That Explained My High Premium
I received my E-Mod worksheet from the rating bureau, and it was an incomprehensible spreadsheet of codes and numbers. I asked my agent to walk me through it. He showed me how each of my past claims was listed and how the formula weighted them based on their type and cost. I could finally see, in black and white, exactly how a few specific “lost time” claims were the primary driver of my high premium. That worksheet was the diagnostic tool that showed me exactly where my safety problems were and what was costing me the most money.
99% of employers don’t know what “subrogation” means in a workers’ comp context. (The insurer suing a third party who caused the injury).
The Lawsuit My Insurer Filed on Our Behalf
An employee was injured on a job site when a piece of equipment from another contractor malfunctioned. Our workers’ compensation policy paid the claim. A year later, we learned our insurer was suing the equipment manufacturer to recover the money they had paid out. This is “subrogation.” Our insurer had the right to step into our shoes and sue the at-fault third party. We had to cooperate, but the lawsuit didn’t cost us anything. Any money they recovered was used to reduce the cost of our claim, which helped our E-Mod.
This one small action of challenging your payroll audit if you disagree will save you money.
The Audit I Fought and Won
The year-end workers’ comp audit said I owed an extra $5,000 in premium because they had reclassified one of my employees into a higher-risk category. I knew this was wrong. I gathered my documentation, including the employee’s detailed job description, and I formally challenged the audit finding. I showed that his duties clearly fell within the lower-risk code. The insurance company reviewed my evidence and reversed their decision. Many businesses just accept the audit as final. Challenging it, when you have the proof, can save you a fortune.
Use a high-deductible workers’ comp plan to lower your premium, if you have the cash flow to handle the deductible.
The Deductible That Saved Us 30%
Our workers’ comp premium was a huge expense. Our agent suggested a high-deductible plan. We agreed to pay the first $5,000 of every medical claim. In exchange for taking on that risk, the insurance company gave us a 30% discount on our overall premium. We have a great safety record, so we rarely have claims. The huge premium savings far outweighed the occasional deductible we had to pay. It was a smart financial move for a safe company with a strong cash flow.
Stop assuming your US-based policy covers employees traveling or working internationally.
The Trip to London and the Uninsured Injury
We sent an employee to a conference in London. While there, she slipped and fell in the hotel, breaking her wrist. We discovered that our US-based workers’ compensation policy did not cover her while she was overseas. To be protected, we would have needed to add “foreign voluntary workers’ compensation” coverage to our policy. It’s a specific endorsement that extends coverage to employees who are traveling or working outside the United States. Her injury in London was a risk we hadn’t even thought about.
Stop thinking that a “mental-mental” claim (mental stress causing a mental injury) is covered in most states.
The Stressful Job and the Uncovered Breakdown
One of our top salespeople suffered a mental breakdown, which he claimed was a result of the high-stress nature of his job. He filed a workers’ comp claim for his therapy and time off work. It was denied. A “mental-mental” claim, where a gradual mental stressor leads to a mental injury, is one of the most difficult types of claims to win. Most states have very high barriers of proof, and many do not cover it at all. The very real stress of his job was not considered a compensable injury under the law.
The #1 tip is to work with an agent who specializes in workers’ comp for your industry.
The Specialist Who Knew My Risks
My generalist insurance agent was a nice guy, but he didn’t really understand the unique risks of my manufacturing business. I switched to an agent who specialized in my industry. The difference was stunning. He knew the specific classification codes for my employees. He knew the common safety issues we faced. He had relationships with carriers who offered dividend plans for safe businesses in my sector. His specialized knowledge not only got me better coverage but also saved me a significant amount of money.
I’m just going to say it: The classification codes for workers’ comp are archaic and don’t reflect modern job roles.
The Social Media Manager Who Was Classified as a “Clerical Worker”
I was trying to find the right workers’ comp classification code for our new “Social Media Manager.” I was looking at a list of codes that felt like it was written in 1950. There was no code for what she did. The closest, lowest-risk option was “Clerical Office Employee.” The system of codes is rigid and outdated, and it has not kept pace with the modern economy. It often forces you to jam a 21st-century job role into a 20th-century box, which can lead to confusion and audit problems.
The reason a claim was denied is that the employee was engaged in a personal errand, even if they were using a company car.
The Detour to the Dry Cleaner That Was Not a Work Trip
I allowed an employee to drive a company van home. On his way home from a job site, he made a 10-minute detour to go to his personal dry cleaner. During that detour, he was in an accident. The workers’ comp claim was denied. The court ruled that he had temporarily abandoned his employment for a “personal errand.” The injury did not “arise out of and in the course of employment.” That brief, personal stop had taken him outside the protection of our workers’ comp policy.
If you’re still treating all your workers as “clerical,” your auditor is going to have a field day reclassifying them.
The “Office” With a Workshop in the Back
To get the lowest possible workers’ comp rate, a friend of mine classified every single employee at his cabinet shop as a “clerical office employee.” When the insurance auditor came, he walked past the two people at desks and into the back, where he saw ten people operating power saws. The auditor, of course, reclassified everyone correctly. My friend was hit with a massive bill for the back-premium he owed. The auditors are not stupid, and they will always find out. Proper classification is the only sustainable strategy.
The biggest lie is that you can’t be sued if the employee’s injury was caused by your “gross negligence.”
The Safety Guard We Removed and the Lawsuit We Deserved
To speed up production, we removed a key safety guard from a piece of machinery. An employee was then horribly injured by that machine. Workers’ comp paid his initial medical bills. But then he filed a separate lawsuit against us, claiming our “gross and willful negligence” had created a dangerous workplace. Because our actions were so egregious, the “exclusive remedy” protection of workers’ comp was pierced. We were on the hook for a massive civil lawsuit that our standard policy couldn’t fully cover.
I wish I knew that I needed to keep records for years to defend against long-tail claims like asbestos exposure.
The Claim from an Employee Who Had Retired 20 Years Ago
We received a workers’ comp claim from a former employee who had retired two decades ago. He had just been diagnosed with a lung disease, which he claimed was a result of his exposure to chemicals at our plant in the 1990s. This was a “long-tail” claim, where the injury doesn’t manifest for decades. We were legally responsible. It was a powerful lesson that our workers’ comp liability doesn’t end when an employee leaves. We have a responsibility to maintain records and protect ourselves against the ghosts of our past operations.
99% of business owners don’t know the role of the NCCI (National Council on Compensation Insurance) in setting rates.
The Secret Organization That Controls My Premiums
I always wondered where my workers’ comp rates came from. I learned about the NCCI (National Council on Compensation Insurance). It’s a private, non-profit organization that collects massive amounts of data and creates the standardized classification codes, rates, and E-Mod formulas that are used in most states. They are a semi-governmental, hugely powerful, and almost invisible entity that has more influence over my insurance costs than any other single factor. They are the secret rule-makers of the entire workers’ comp system.
This one habit of taking every injury complaint seriously, even if you’re skeptical, will protect you legally.
The Complaint We Ignored and the Lawsuit That Followed
An employee complained of a minor backache, which we dismissed as him just being a complainer. We didn’t fill out an incident report. A year later, he sued us, claiming that the initial injury had worsened due to our failure to accommodate him and that we had retaliated against him for his complaint. Our initial skepticism and failure to document the complaint made us look like bad, uncaring employers in court. Now, we take every single complaint seriously and document it immediately. It’s the best legal protection you can have.
Use a telemedicine service for initial injury consultations to reduce costs and get faster treatment.
The Video Call That Was Better Than the ER
An employee had a minor, non-emergency injury. Instead of sending him to the expensive and slow emergency room, we used a telemedicine service that specializes in occupational medicine. Within 15 minutes, he was on a video call with a doctor who was able to diagnose the injury, prescribe medication, and send a report to us and the insurer. The cost was a fraction of an ER visit, our employee got immediate care, and the claim was opened and managed instantly. It was a faster, cheaper, and better process for everyone.
Stop assuming your General Liability policy will cover an injury to an employee. It has an employer’s liability exclusion.
The Employee Who Fell and the GL Policy That Wouldn’t Help
An employee fell and was injured in our office. I mistakenly thought our Commercial General Liability (CGL) policy would cover it. It did not. The CGL policy has a very clear and absolute “Employer’s Liability” exclusion. It does not cover bodily injury to your own employees. That is the exclusive job of your Workers’ Compensation and Employer’s Liability policy. The two policies are designed to be mutually exclusive, covering two completely different types of claimants: employees and the public.
Stop thinking you can avoid getting a policy just because you only have one employee. Check your state’s threshold.
The First Hire and the First Insurance Policy
I started my business as a solo entrepreneur. When I hired my very first part-time employee, I thought I was still too small to need workers’ comp. I was wrong. I checked my state’s law and discovered the threshold was one employee. The moment I hired my first person, I was legally required to have a policy. Every state is different—some have a higher threshold—but you absolutely must know your state’s rule. For most businesses, the first hire is the trigger that makes workers’ comp a legal necessity.
The #1 secret for employers is that you have the right to direct medical care in many states, at least for the initial visit.
The Doctor We Chose for Our Injured Employee
An employee was injured, and he wanted to go to his personal family doctor. We checked our state’s workers’ comp law and learned that as the employer, we had the right to “direct medical care,” at least for the first 30 days. We had already established a relationship with a great local occupational medicine clinic that specialized in work injuries. By sending our employee to our designated doctor, we were able to ensure he got excellent, specialized care and that the claim was managed properly from day one.
I’m just going to say it: Workers’ comp is a political football, and the benefits and rules are constantly changing.
The Law That Changed My Liability Overnight
For years, my state had a very business-friendly workers’ comp law. After a new election, the legislature completely reformed the system, making it much more employee-friendly, increasing benefits, and making certain claims easier to prove. My company’s liability and my insurance premiums changed overnight because of a shift in the political winds. I realized that workers’ comp is not a static set of rules; it’s a constantly evolving system that is a political battleground between business and labor interests. You have to stay informed.
The reason a claim was denied for a heart attack on the job is that it couldn’t be proven that the work exertion was the primary cause.
The Heart Attack at Work That Wasn’t a “Work” Heart Attack
Our 60-year-old, chain-smoking accountant had a heart attack while sitting at his desk. His family filed a workers’ comp claim. It was denied. The court ruled that for a heart attack to be a compensable work injury, the employee must prove that the exertion of their job was a substantial, contributing cause. Because he was performing his normal, sedentary duties, it could not be proven that his work caused the heart attack. It was a tragic event that happened at work, but it was not an event that happened because of work.
If you’re still paying employees in cash “under the table,” you have a massive, uninsured workers’ comp exposure.
The Cash Employee and the Uncovered Injury
To save money, I paid a general laborer in cash every week. He was “off the books.” He was seriously injured on my job site. Because he was not on my official payroll, he was not covered by my workers’ compensation policy. He was an uninsured employee. I was hit with massive state fines for tax and insurance fraud, and I was personally responsible for paying all of his medical bills and lost wages. That “under the table” arrangement became the biggest and most expensive mistake of my career.
The biggest lie is that the insurer handles everything. You have a duty to cooperate and manage the claim.
The Claim I Reported and Then Ignored
An employee was injured, and I promptly reported the claim to my workers’ comp insurer. I thought my job was done. I was wrong. The insurer sent me forms to fill out. They called me for information about the employee’s job duties. I was busy and ignored their requests. The claim was delayed, and the employee hired a lawyer. I learned that I, the employer, have a “duty to cooperate” in the investigation. You can’t just report a claim and walk away; you have to be an active partner in the process.
I wish I knew what an “exclusive remedy” lawsuit was and how to defend against it.
The Lawsuit That Tried to Pierce the Shield
An employee was injured and received his workers’ comp benefits. But then he filed a civil lawsuit against us, trying to get around the “exclusive remedy” protection that says workers’ comp is the only solution. His lawyer used a clever legal argument to try and pierce that shield. Thankfully, our Employer’s Liability (Part B) policy kicked in. It hired expert lawyers who knew exactly how to defend against these specific types of lawsuits and get the case dismissed. That Part B coverage is the only thing that defends the “exclusive remedy” shield.
99% of employers don’t understand the “second injury fund” and how it can help with claims for pre-existing conditions.
The Fund That Protected Us From a Past Injury
We hired an employee who had a pre-existing back condition from a previous job. He re-injured his back while working for us. We were worried we would be on the hook for a massive claim. But our state has a “Second Injury Fund.” We were able to prove that his permanent disability was a result of both his new injury and his old one. The fund stepped in and paid for a portion of the claim. It’s a system designed to encourage employers to hire previously injured workers, and it saved us a fortune.
This one small action of setting up a designated panel of physicians (where allowed) can help control medical costs.
The List of Doctors That Saved Us Money
Our state law allows employers to create a “panel” of designated physicians for work injuries. We worked with our insurer to create a list of excellent, local occupational health doctors. When an employee is injured, we provide them with this list, and they can choose a doctor from it. This simple action helps us control costs because these doctors are familiar with the workers’ comp system. It also ensures our employees get high-quality, specialized care from doctors who are focused on getting them healthy and back to work.
Use a “stop-gap” endorsement if you’re in a monopolistic state (like Ohio or Washington) to get employer’s liability coverage.
The Gap in My State-Run Insurance
I operate my business in a “monopolistic” state, which means I have to buy my workers’ compensation insurance directly from a state-run fund. I thought I was fully covered. I was wrong. The state fund provides the basic medical and lost wage benefits (Part A). It does not provide Employer’s Liability (Part B) coverage for lawsuits. To get this critical protection, I had to add a special “stop-gap” endorsement to my Commercial General Liability policy. It’s a crucial piece of the puzzle for businesses in these unique states.
Stop assuming your out-of-state employees are covered just because your business is based in another state.
The Remote Worker and the Wrong Policy
Our business is in Pennsylvania, and we have a workers’ comp policy there. We hired a fully remote employee who lives in Florida. He was injured in his home office. We discovered our Pennsylvania policy provided no coverage for him. We were legally required to have a Florida workers’ comp policy in place for him. We had to quickly buy a new policy and were fined for being out of compliance. You must have coverage in every single state where you have an employee, even if it’s just one person working from their kitchen table.
Stop thinking that an employee can’t sue a third party for a workplace injury. (And that third party can then sue you).
The Lawsuit That Boomeranged Back to Us
An employee was injured on a job site due to a faulty piece of equipment made by another company. He received his workers’ comp benefits from us. Then, he filed a separate product liability lawsuit against the equipment manufacturer. The manufacturer then turned around and filed a lawsuit back against us, claiming we had used the equipment improperly. This “third-party-over” action is a complex and dangerous loophole that can drag an employer back into a lawsuit, even when they have paid the workers’ comp claim.
The #1 tip for an audit is to have your payroll records perfectly organized by employee and job classification.
The Audit We Sailed Through
I used to dread our annual workers’ comp audit. It was a scramble to find all the records. Now, we are prepared. We use our payroll software to generate a perfect report for the auditor. It shows every employee, their gross pay, and their specific workers’ comp classification code. We have all our subcontractor certificates of insurance in a neat binder. When the auditor comes, we hand them a perfect, organized package. The audit takes less than an hour, and we never have any surprise charges because our records are clean.
I’m just going to say it: The system is designed to benefit insurers and lawyers more than the injured worker or the employer.
The Only People Who Really Won Were the Lawyers
Our employee had a legitimate but complex injury. The claim dragged on for two years. The insurance company hired lawyers to fight it. The employee hired lawyers to fight back. In the end, after years of stress, the case settled. A huge portion of the settlement money went to the lawyers on both sides. The system, which was supposed to be a simple, administrative way to help an injured worker, had devolved into a legal battle where the only clear winners were the ones billing by the hour.
The reason a claim was denied is that the employee refused a reasonable offer of light-duty work.
The “Light Duty” Job He Refused
An employee was recovering from an injury. His doctor cleared him for “light duty” work. We created a suitable, temporary position for him in the office, which he refused to take, saying he wanted to wait until he was “100% better.” Because he had refused a reasonable offer of modified work, the insurance company was legally allowed to terminate his lost-wage benefits. The system is designed to encourage a return to work, and an employee’s refusal to cooperate can end their right to a paycheck.
If you’re still not understanding your policy’s terrorism exclusion, you’re ignoring a potential gap.
The Unimaginable Event and the Uncovered Claim
Our office was located in a major city. A terrorist event occurred nearby, and several of our employees were injured in the chaos while trying to evacuate the area. We were shocked to learn that our standard workers’ compensation policy had a specific exclusion for injuries resulting from an act of terrorism. To be covered, we would have needed to purchase a special, separate terrorism policy. It was a remote and terrifying risk, but it was a gap in our coverage that we never even knew existed.
The biggest lie is that the premium is the only cost. Indirect costs of a claim (lost productivity, etc.) are much higher.
The $10,000 Claim That Really Cost Us $50,000
An employee had an injury that resulted in a $10,000 workers’ comp claim. I thought that was the total cost. I was wrong. The “indirect” costs were much higher. We had to pay overtime to other workers to cover his shifts. We lost productivity while training his replacement. Our managers spent hours on paperwork. And our E-Mod went up, increasing our premiums for years. Studies show the indirect costs of an injury are often four to five times the direct cost of the claim. The iceberg is much bigger than the tip.
I wish I knew that I could be held liable for injuries to a temp agency employee.
The “Temp” Who Was Our Shared Responsibility
We used a temp agency to hire a worker for a short-term project. He was injured on our site. I thought the temp agency’s workers’ comp would cover everything. I learned that as the “host employer,” we still had a shared responsibility for his safety. He filed a lawsuit against us, claiming our unsafe premises caused his injury. While the temp agency’s policy was primary, our own general liability and employer’s liability policies were still pulled into the lawsuit. You can’t completely transfer the risk for people working in your building.
99% of employers don’t know that their E-Mod follows their business, even if they change their name or ownership structure.
The Bad Safety Record We Couldn’t Escape
Our company had a terrible safety record and a very high E-Mod. We thought we could get a fresh start by dissolving the old company and forming a new one with a new name. The state rating bureau was not fooled. Because the ownership and operations of the “new” company were substantially the same as the old one, our high E-Mod followed us. There is no escaping a bad claims history. The only way to fix your E-Mod is to improve your safety record, not just change the sign on the door.
This one small action of reviewing your loss runs from the insurer annually will show you exactly what’s driving your costs.
The Report That Told Me My Company’s Story
I asked my agent for a copy of our “loss run” report. It was a detailed history of every single workers’ comp claim filed against our company for the past five years. It showed me which departments had the most injuries, what types of injuries were most common, and how much each claim had cost. It was a data-driven story of our company’s safety successes and failures. That one report became our roadmap for our safety program, allowing us to focus our training on the areas of greatest risk.
Use a “waiver of subrogation” endorsement with caution, as you’re giving up your insurer’s right to recover money.
The Right I Signed Away in a Contract
I signed a contract with a large general contractor that required me to add a “waiver of subrogation” to my workers’ comp policy. An employee of mine was later injured on the job site due to the general contractor’s negligence. My workers’ comp insurer paid the claim. Normally, they would have then sued the general contractor to get their money back. But because I had signed that waiver, I had given up their right to do so. The cost of that claim now stayed on my record, and my E-Mod went up.
Stop assuming that stress from a legitimate personnel action (like a demotion) is a compensable claim.
The Demotion and the Uncovered Stress Claim
We had to demote a manager due to poor performance. He subsequently filed a workers’ comp claim, alleging the stress of the demotion had caused him severe anxiety. The claim was denied. The law in our state specifically excludes mental stress claims that arise from a “lawful, good-faith personnel action.” Because our demotion was well-documented and not discriminatory, the resulting stress was not a compensable work injury. The system does not insure you against the normal stresses of performance management.
Stop thinking that because you’re a family business, you don’t need workers’ comp.
The Nephew Who Was Still an Employee
I ran a small family business and employed my nephew. I figured we were family and didn’t need to worry about workers’ comp. He was injured, and the family relationship quickly became a legal one. He was my employee, and under the law, I was required to have coverage for him. My failure to do so resulted in huge fines and made me personally liable for his medical bills. In the eyes of the law, a family member on your payroll is no different from any other employee.
The #1 secret is to have a good relationship with a local occupational medicine clinic.
The Doctor Who Was Our Partner in Safety
Instead of letting our employees go to any random ER, we built a strong relationship with a local occupational medicine clinic that specializes in work injuries. They know our business, our jobs, and our return-to-work program. Their doctors are focused on providing excellent care while also understanding the workers’ comp system. This partnership has resulted in better medical outcomes for our employees and lower claim costs for our company. Our clinic isn’t just a vendor; they are a key partner in our safety program.
I’m just going to say it: The legal standard for proving a work-related injury is much lower than “beyond a reasonable doubt.”
The “More Likely Than Not” Standard
An employee claimed a back injury. We were skeptical, as there were no witnesses. We thought he would have to definitively prove it happened at work. We were wrong. The legal standard in a workers’ comp case is typically “a preponderance of the evidence.” This means the employee only has to show that it was “more likely than not” (a 51% probability) that his injury was work-related. It’s a much lower burden of proof than in a criminal case, which is why many seemingly questionable claims are ultimately approved.
The reason a claim was denied is that the employee violated a known and enforced safety rule.
The Safety Rule That Was Our Best Defense
An employee was injured while operating a machine without the required safety guard, which he had removed. He had been repeatedly trained on the rule to never remove the guard, and we had disciplined other employees for it in the past. The workers’ comp claim was denied. His injury was a direct result of his willful violation of a known and consistently enforced safety rule. Because he had chosen to ignore his training, the company was not held responsible for the consequences. Our consistent enforcement was the key.
If you’re still letting your workers’ comp policy lapse, you could face daily fines and even criminal charges.
The Unpaid Premium and the Criminal Complaint
My business was struggling, so I let my workers’ comp policy lapse for a few months, thinking I could get it back later. It was a massive mistake. The state’s workers’ comp board sent me a notice, informing me that I was being fined for every single day I was without coverage. Worse, they informed me that knowingly failing to provide workers’ comp is a criminal misdemeanor in my state. I had to hire a lawyer. My attempt to save a few premium payments had exposed me to crippling fines and potential criminal charges.
The biggest lie is that it covers pain and suffering. It only covers medical expenses and a portion of lost wages.
The Limited Benefits of the “Grand Bargain”
My employee was expecting a big, six-figure payout after his injury, like in a personal injury lawsuit. He was shocked and angry to learn that workers’ comp doesn’t work that way. It’s a “no-fault” system that provides specific, limited benefits. It covers 100% of his medical bills and about two-thirds of his lost wages. It does not pay anything for “pain and suffering.” That is the “grand bargain” of workers’ comp: the employee gets faster, no-fault benefits, but gives up the right to sue for larger, non-economic damages.
I wish I knew that I could be sued by a family member of an employee who died on the job.
The Lawsuit from the Grieving Family
A tragic accident at our company resulted in the death of an employee. Our workers’ comp policy paid the required death benefit to his widow. We thought that was the end of our legal obligation. We were wrong. The widow then filed a separate civil lawsuit against us, alleging our gross negligence had caused her “loss of consortium and companionship.” This type of lawsuit, brought by a family member, is not always barred by the “exclusive remedy” rule. Our Employer’s Liability (Part B) policy was the only thing that protected us.
99% of employers don’t challenge their classification codes, even when they are wrong.
The Wrong Code That Was Costing Us a Fortune
For years, our workers’ comp auditor had been lumping all of our employees under a single, high-risk “manufacturing” code. The premium was huge. A new agent we hired actually read the code definitions. He showed us that our delivery drivers, our salespeople, and our office staff all qualified for their own, separate, much lower-risk (and cheaper) classification codes. By challenging the old audit and properly segregating our payroll, we saved over 30% on our premium. We had been overpaying for years because we never questioned the code.
This one small action of calling your agent before hiring an employee in a new state will save you a world of trouble.
The New Hire and the New Policy
We were about to hire our first remote employee, who lived in a different state. Before we made the offer, I called our insurance agent. He told me that we would need to add that state to our workers’ compensation policy and that the rates and rules there were completely different. That one, five-minute phone call allowed us to factor the new insurance costs into our hiring budget and get the proper coverage in place before the employee’s first day. It saved us from the fines and penalties of being an uninsured employer.
Use your workers’ comp policy as a tool for improving workplace safety, not just as a necessary expense.
The Insurance Company That Became Our Safety Partner
I used to see my workers’ comp insurer as just a bill I had to pay. Then I discovered they offered a huge library of free loss control and safety resources. They sent a safety expert to our facility, at no charge, who helped us identify risks. They gave us templates for safety manuals and training programs. I realized the insurer and I had the exact same goal: to prevent injuries. By using their expertise, we were able to create a safer workplace, which lowered our claims, which in turn lowered our premium.