Running a horse-related business often requires help. But when you hire someone, he could be injured while doing his job. Your employee’s medical bills and lost wages can be costly, and you could face a lawsuit from your employee in an attempt to recoup the expenses. That’s where workers’ compensation (also called workers’ comp or WC) insurance comes in.

What is Workers’ Comp Insurance?

Workers’ compensation insurance helps pay set benefits for injured workers, regardless of who or what caused the accident. Employees receive benefits if injured within the course of their employment, whether hurt at the workplace, when working off premises or in an automobile accident while working. Workers’ compensation insurance may also provide coverage for employees who develop a work-related illness, and may provide death benefits to surviving spouses and dependents.

Who Has to Have WC Insurance?

Regina Anderson is the technical service manager for the Independent Insurance Agents of Texas, a non-profit association. She says that workers’ comp laws vary by state. “Texas is the only elective WC state, which means that the employer does not have to purchase workers’ compensation insurance. However, if the employer gets sued, he loses some common law defenses in court, and may have unlimited liability.” She adds that in some states, benefits are paid to injured workers by the state in lieu of workers’ comp insurance.

Since laws vary from state to state, it is important to understand your own state laws and be sure you work with an insurance agent who is licensed to provide workers’ comp insurance in your state. The website www.workerscompensation.com provides links to individual states’ WC laws, or you can contact your state’s division of workers’ compensation.

Some states provide exemptions to workers’ comp requirements for companies of certain sizes or for those employing domestic workers or farm and ranch workers. Other states allow employers of certain sizes and payrolls to self-insure. Self-insurance best suits larger employers, and usually must be approved by the state. When self-insuring, the employer must pay out of his own pocket for any injuries or claims made by employees. Self-insuring is risky: if no employees make workers’ comp claims, you don’t have to spend any money. But if several employees are injured or serious injuries or deaths occur, you may spend millions paying out claims.

Who is Covered?

Coverage also varies by state. In some cases, the business owner and family members employed at the business are not covered unless additional coverage is purchased for them. In some states, like Texas, domestic workers and farm and ranch workers are not covered by the state’s workers’ compensation law (with some exceptions). Thoroughly review your workers’ comp insurance policy with your insurance provider.

In many states, injuries or illnesses are not covered under workers’ comp if the employee:

• was intoxicated or using a controlled substance when injured

• intentionally injures himself

• was assaulted by someone else, unless it was somehow related to his employment

• was injured during voluntary participation in a recreational, social or athletic activity that was not part of work-related duties

• was injured due to an “Act of God” (for instance, a lightening strike) unless the employee has greater risk to exposure to Acts of God because of his employment

• was “goofing off,” “playing around” or engaging in “horseplay” when injured

• suffered mental trauma as a result of a legitimate transfer, promotion, termination or other personnel action.

How Does WC Work?

The goal of workers’ compensation insurance is to get workers healthy so that they can go back to work and won’t become a drain on state and federal governments. To that end, WC insurance pays for necessary medical care, hospitalizations and rehabilitation. It also pays injured employees a percentage of their normal weekly wages until they’re ready to return to work. If an employee is permanently injured, WC insurance pays a percentage of the employee’s normal weekly wages in perpetuity.

WC policies may also include coverage for occupational diseases that occur as a result of the job or workplace. For example, employees who contracted mesothelioma after coming in contact with asbestos at the workplace may receive workers’ comp coverage in some states. WC may also provide death benefits to the surviving spouse and children that covers the loss of potential income, but not pain, suffering or grief.

Before awarding workers’ comp claims, most insurance companies need verification that the injury or illness was work-related. They may require the employee, employer and medical professionals involved in the employee’s care to complete incident forms or other paperwork. They may also visit the place of employment, and if a company suspects that an employee is filing a fraudulent claim, they may hire a private investigator to watch the employee for signs the injury was faked. If an employee is found to be faking a workplace injury in order to receive workers’ comp payments, he may face criminal charges of fraud.

In most states, once an employee accepts WC payments for medical care or for lost wages, he forfeits his right to sue the company for additional damages (pain, suffering, grief, etc.)

What If I Don’t Carry WC Insurance?

In every state but Texas that has a WC law, WC insurance is mandatory, although as mentioned above, some states do have exemptions for companies of certain sizes or certain types of workers. If you are required to provide workers’ comp but fail to do so, you may face large fines.

Even if your company is exempt from WC requirements, this insurance may be worth the investment. If a worker is injured while on the job, you could be liable for medical bills and lost wages. Some states have established funds that pay the expenses for employees who were injured and whose employers did not provide WC. This protects the employee, but the employer likely will face stiff penalties.

Where do I get WC Insurance?

Some states provide benefits to injured workers through state-administered funds, while in other states employers purchase workers’ comp insurance through private companies. Your WC premium is often based on the number of employees, your payroll, and the level of risk associated with the job. Your loss history also plays into the calculation. Some jobs are considered “high risk” and insurance premiums are extremely high. In some instances, states have established programs that offer WC coverage to employers who cannot get coverage elsewhere.

It is also important to know that in many states it is illegal to fire an employee who files a workers’ comp claim. In the past, some employers have used threat of termination to intimidate employees so they would not file a claim (which could cost the company money in increased insurance premiums).

Workers’ compensation insurance can be confusing, but it is well worth investing the time to understand your company’s responsibilities. Talk to your state’s workers’ comp division, and find a good insurance provider who can walk you through it all.