Guest Post by Russell Cawyer: Does Your Farm Need to Purchase Worker's Compensation Insurance?

Russell D. Cawyer, a lawyer in my firm who publishes the Texas Employment Law Update, offers the following insights on the decision many horse farms are faced with...do you need to buy worker's compensation insurance?

"Most farm, ranch and horse owners are employers to some extent or another. Whether employing stable workers, trainers, or other labor, most of these relationships would be legally classified as employment (rather than independent contractor) relationships–even if the services are on a short-term or infrequent basis. The purpose of this post is to discuss the differences between employers that are worker’s compensation subscribers and those that are nonsubscribers.

Worker’s compensation is a form of insurance purchased by employer to provide coverage for medical expenses, partial income and disability benefits for an employee suffering an injury or illness arising in the course and scope of his or her employment. In Texas, employers are permitted to opt-out of the state worker’s compensation. These employers are called nonsubscribers. There are advantages and disadvantages

The primary advantage of worker’s compensation coverage is that workers compensation subscribers (i.e., employers having workers compensation insurance coverage) cannot be held liable in court for employee injuries or illnesses that occurred in the course and scope of the employee’s employment. This protection does not apply to individuals who are independent contractors of an employer. The primary disadvantage to worker’s compensation coverage is its cost. Another disadvantage is that worker’s compensation subscribers cannot discriminate or retaliate against employees who report or have workplace injuries, and employees can sue employers if they experience an adverse employment action shortly after reporting or having a worker’s compensation claim.

Nonsubscribers, on the other hand, cannot be sued for discrimination or retaliation for taking adverse action against an employee that has been injured on the job.  They can, however, be sued by the employees for negligence and gross negligence when they are injured at work. The law is written to encourage employers to purchase workers compensation insurance. Consequently, nonsubscribers have few defenses to these claims such as claims for contributory or comparative negligence (aka “proportionate liability”) where liability is apportioned between the employer and employee based on percentages of relative fault. The only defenses a nonsubscriber has is that the employee was the sole cause of the injury or was intoxicated at the time. 

Understand that your general liability, homeowners or umbrella insurance policies alone do not provide coverage employee injuries or illnesses. Most such policies have exclusions that do not cover claims made by employees or those otherwise providing services for the employer (i.e., independent contractors). Whether to purchase worker’s compensation insurance is an important business decisions and the pros and cons of that decision should be weighed carefully."

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