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Frequently Asked Questions About Non-Subscription and ERISA
© 2013 by Paul M. Hood Paul M. Hood, P.C.
1717 Main Street, Suite 5500, L.B. 49 Dallas, Texas 75201
(214) 373-3214 (214) 373-0843 (fax)
pmhood@pmhlaw.com www.pmhlaw.com
© 2013 by Paul M. Hood, P.C. Page ii
I N D E X 1. Who Is AIS? ....................................................................................... 1
2. What Is Occupational Accident Coverage? ...................................... 2
3. What’s the Market Like? .................................................................... 3
4. Who Are Some Well Known Non-subscribers? ................................. 4
5. How Does AIS Fit Into All This? ......................................................... 5
6. Who Administers the Claims? ............................................................. 6
7. What Does the AIS Program Look Like? ............................................ 7
8. Do I Have To Have Workers’ Compensation Insurance? .................. 8
9. What Is “Non-subscription” Anyway? .................................................. 9
10. What Are the Advantages of Opting Out? ......................................... 10
11. What Are the Disadvantages of Opting Out? .................................... 11
Table 1: Top Five Reasons Why Non-subscribing Employers Did
Not Purchase WC Coverage (as of 2012) ................................................. 12
© 2013 by Paul M. Hood, P.C. Page iii
Table 2: Top Five Reasons Why Subscribing Employers Purchased
Workers’ Compensation Coverage (as of 2012) ........................................ 13
12. Shouldn’t Everyone Opt Out? ........................................................... 14
13. Who Is Opting Out? .......................................................................... 15
Table 3: Percentage of Texas Employers That Are Non-subscribers
by Industry (2012 estimates) ...................................................................... 16
Table 4: Percentage of Texas Employers That Are Non-subscribers
and Percentage of Texas Employees That Are Employed by Non-
subscribers (1993-2012) ............................................................................ 17
Table 5: Percentage of Texas Employers that Are Non-subscribers
by Employment Size (1995-2012) ............................................................. 18
14. What About Workers’ Comp Reform? ............................................... 19
15. What Does Everyone Think About the Reform? ............................... 20
16. What Do I Have to Do to Opt Out? ................................................... 21
17. What If I Don’t File My Form-005 or Post My Notices? ..................... 22
18. What Is ERISA? ............................................................................... 23
© 2013 by Paul M. Hood, P.C. Page iv
18. What Does (and Doesn’t) ERISA Cover? ........................................ 24
19. Do I Need an ERISA Plan If I Opt Out? ........................................... 25
20. What Documents Do I Need to Comply With ERISA? ..................... 26
21. What Does a Summary Plan Description Require? ......................... 27
22. What If I Sell the Company? ............................................................ 28
23. What About Negligence Lawsuits? .................................................. 29
24. Why Would Someone Sue Their Employer? ................................... 30
25. How Can I Avoid a Lawsuit? ............................................................ 31
26. Do I Really Lose All My Defenses? .................................................. 32
27. How Can I Tell When a Claim Is Suspicious? .................................. 33
28. How Does ERISA Affect a Negligence Lawsuit? ............................. 34
29. How Does ADR Work? .................................................................... 35
30. What Is Mediation? .......................................................................... 36
31. What Is Arbitration? ......................................................................... 37
© 2013 by Paul M. Hood, P.C. Page v
32. What Should a Good Non-subscriber Program Contain? ................ 38
AIS Contact Information ............................................................................. 39
© 2013 by Paul M. Hood, P.C. Page 1
Q: Who Is AIS? A: Accident Insurance Services, Inc.
• Since 1988, AIS has been a network of resources & solutions to general agents and agents in the occupational accident insurance industry throughout the State of Texas.
• AIS provides non-subscription field support, training and free
CE courses for thousands of agents.
• AIS is a specialist in occupational accident coverage. We provide policies with and without employer’s liability, TPA services, safety for employers & niche accident products.
• Michael L. Davis, Founder, President • Robert J. Rogers, CLU, ChFC, Executive Vice President &
Chief Marketing Officer, A National Faculty Member for The National Alliance of Insurance Education & Research.
• Beckie Ervin, CIC, Vice President, Underwriting • Texas Insurance Corporation with L&H, P&C, Surplus Lines
and MGA licenses
© 2013 by Paul M. Hood, P.C. Page 2
Q: What Is Occupational Accident Coverage? A: Occupational accident coverage is an affordable alternative to
statutory WC in Texas
• Non-subscription in Texas has been authorized since 1913
• Section 406.002 of the Texas Labor Code
• Premiums and claims costs significantly lower than
traditional WC policies
Policy has three components that provide most of the benefits associated with WC without the unlimited and open-ended liabilities
• Medical coverage subject to deductibles, limits and medical management
• Short term disability with a limited term of weeks
• AD&D coverage with limits of $150,000 in death
benefits
© 2013 by Paul M. Hood, P.C. Page 3
Q: What’s the Market Like? A: A Texas Sized Market
• As of 2012, 33% of all Texas employers were non-subscribers, covering approximately 1.7 million non-public employees.
• Approximately 113,000 businesses in Texas are non-
subscribers, many of them with 500 or more employees.
• Occupational accident coverage generates $200 MILLION in annual premium in Texas
A Well Established Market
• Mature and robust market -- product has been available for
more than 20 years
• Documented historical results and trends
• Very profitable line of business if properly administered
© 2013 by Paul M. Hood, P.C. Page 4
Q: Who Are Some Well Known Non-subscribers? A: These and many more …
• Wal-Mart Stores, Inc.
• Costco Wholesale Corp.
• Brinker International (Chili’s, Romano’s, Macaroni Grill)
• Best Buy Co., Inc.
• Randalls Food Markets & Tom Thumb Food & Drug
• Pappas Restaurants, Inc.
• James Avery Jewelers
• Nordstrom, Inc.
• Labatt Food Service, L.P.
• JC Penney Company Inc.
• Whole Foods Market
• Home Depot, Inc.
• Baylor Healthcare Systems
• Pilgrims Pride Corp.
• Just Brakes
• Inter Continental Hotels Corp.
• Golden Corral
• UT Southwestern Hospital
• Omni Hotels
• Methodist Hospitals of Dallas
• Hilton Worldwide, Inc.
• JB Hunt Transport Inc.
• Kroger Texas, LP
• Dairy Queen
• Tyson Foods, Inc.
• Taco Bell
• Memorial Hermann Healthcare Systems
• Touchstone Bernays
• Whole Foods Market, Inc.
• Sysco Corporation
• Sonic Drive-In
• H-E-B Grocery (300 store grocery chain)
© 2013 by Paul M. Hood, P.C. Page 5
Q: How Does AIS Fit Into All This? A: AIS is THE premier marketing and distribution company for
occupational accident insurance statewide
• Staff offers more than 100 years of combined experience in Texas occupational accident coverage
• Experience recruiting and training agents for product
distribution
• Manage claims, collect premiums and pay commissions to a network of over 1,000 agents across the state
© 2013 by Paul M. Hood, P.C. Page 6
Q: Who Administers the Claims? A: Caprock Claims Management LLC in Dallas, Texas
• Specific expertise in management of occupational accident programs (not a converted or diverted WC administrator)
• Staff exclusively dedicated to servicing this program for AIS
• Provides billing, claims administration, and customer service
functionality
• Common ownership with AIS creates single focus
© 2013 by Paul M. Hood, P.C. Page 7
Q: What Does the AIS Program Look Like? A: Flexible Coverage Options
• Single benefit plans Separate deductibles and coverage limits for wage loss and medical expense
• Combined benefit plans Aggregate deductibles and coverage limits for wage loss and medical expenses
• Available benefit periods of one, two or three years with varying deductibles
Maximum payable under policies ranges from low of $50,000 to maximum of $6,000,000
• Variety of industries • Large and small employers
• Scattered widely throughout the state geographically
• Established line of coverage and book of business
• Proven marketing organization
• Quality program administrator
• Recognized, respected carrier (“A” rating provides opportunity
to quote 50% more accounts – including the big ones)
© 2013 by Paul M. Hood, P.C. Page 8
Q: Don’t I Have To Have Workers’ Compensation Insurance? A: No. Employers in Texas have always had the choice of “opting
out” of workers comp. In fact, an employer can reject workers’
compensation completely and “go bare,” paying no benefits
whatsoever to injured employees. However, we do not recommend
this path, and believe that non-subscription should be a responsible
alternative, in which employers are encouraged to manage their costs
and provide a safer workplace.
© 2013 by Paul M. Hood, P.C. Page 9
Q: What Is “Non-subscription” Anyway? A: Texas (and now Oklahoma) are currently the only states that
allow private-sector employers the option of becoming “non-
subscribers” to the state WC system. The underlying premise of non-
subscription is that an employer can (and typically will) take better
care of its injured workers than a government bureaucracy. Elements
of non-subscription include:
• Administration
Nonsubscriber establishes its own rules for benefits and liability claim handling
Self-administered by employer or TPA Employer is directly involved in activities related to the
incident investigation, benefit payment, choice of medical provider, and return-to-work plan
• Benefits designed at the employer’s discretion, such as:
Wage replacements for lost time Wage supplements for a reduction in earnings Medical Coverage Payments for death or dismemberment Payments for other permanent bodily impairment
In workers’ comp, the employer’s responsibilities are delegated to the
employee’s medical provider (who may not be a licensed physician),
employer’s physician (in the event of a dispute), a claims adjuster, the
employee, and finally the employer. The process is heavily stacked
in favor of the employee and employee’s physician.
© 2013 by Paul M. Hood, P.C. Page 10
Q: What Are the Advantages of Opting Out?
A: In general, employers who “opt out” of workers compensation are:
• Better able to direct the care of injured employees
• Given a financial incentive to provide a safer workplace
• Can avoid the frustration of dealing with uncaring or unresponsive state agencies or health care providers.
Non-subscriber employers can participate in the decision to send an
employee to a certain doctor, whether to pay a claim, whether an
employee is eligible for benefits, whether light duty work is available,
and even whether a claim is valid at all.
Non-subscriber employers can also receive a direct return on their
effort to increase workplace safety, both in reduced premiums and a
reduction in claims.
Employee morale may also improve when hard working employees
see that “malingerers” are not permitted to take advantage of the
system and collect on suspicious injuries.
© 2013 by Paul M. Hood, P.C. Page 11
Q: What Are the Disadvantages of Opting Out?
A: Although employee lawsuits are rare, the biggest drawback to
non-subscription is the risk of a negligence claim by an employee.
Under workers’ compensation, the benefits are the employee’s
“exclusive remedy” in most cases. However, an employee can sue a
non-subscribing employer for his injuries, and there are certain
important defenses that are not available. Nevertheless, an employer
may still defend itself on several grounds, including the fact that the
employee was the sole cause of the injury, was intoxicated or
engaged in horseplay, or was not acting in the course and scope of
employment at the time of the accident. In addition, arbitration or
other alternative dispute resolution methods are available to non-
subscribers, and can help cut down on the risk of expensive litigation.
EXCEPTION TO EXCLUSIVE REMEDY: It’s important to remember
that even if an employer has workers’ compensation coverage, it can
still be sued for wrongful death or gross negligence, which may often
occur when there is a serious injury. Workers’ comp policies
generally do not provide coverage for this type of lawsuit – AIS does.
© 2013 by Paul M. Hood, P.C. Page 12
Table 1: Top Reasons Why Non-subscribing Employers Did Not Purchase WC Coverage (as of 2012)
Reasons given by employers
All non-
subscribing employers
Employers with more than 500
employees
WC premiums too high
15.0%
23.0%
Too few employees to justify WC
17.0%
N/A
Employers not required to have WC insurance by law
17.0%
14.0%
Medical costs in WC system were too high
10.0%
24.0%
Employer had few on-the-job injuries
17.0%
N/A
Employer felt the company could do a better job than the Texas Workers’ Compensation System at ensuring that employees receive appropriate benefits.
N/A
20.0%
© 2013 by Paul M. Hood, P.C. Page 13
Table 2: Top Reasons Why Subscribing Employers Purchased Workers’ Compensation Coverage (as of 2012)
Reasons given by employers
All WC-
subscribing employers
Employers with more than 500
employees
Employer thought having workers’ compensation was required by law
19.0%
17.0%
Employer was able to provide workers compensation through a health care network
20.0%
20.0%
Employer was concerned about lawsuits
21.0%
17.0%
Employer needed workers compensation to obtain government contracts
9.0%
11.0%
Workers comp insurance rates were lower
11.0%
N/A
Employer was able to reduce its workers’ compensation insurance costs through deductibles, certified self insurance, group self-insurance or other premium discounts
N/A
17.0%
© 2013 by Paul M. Hood, P.C. Page 14
Q: Shouldn’t Everyone Opt Out?
A: No – High risk industries may want to remain in the workers’
compensation system to avoid most lawsuits. The same is true for
employers with high rates of employee turnover and a history of
serious injuries. However, opting out may be a good decision for
companies with a low frequency of accidents (or even a fairly large
frequency of non-serious, “nuisance” accidents), a dedication to
workplace safety, and a desire to participate in the oversight of
employee injury claims.
© 2013 by Paul M. Hood, P.C. Page 15
Q: Who Is Opting Out? A: Approximately 1.7 million Texas employees worked for non-
subscribing employers in 2012. Interestingly, this represents a 2%
decrease since the last reporting period, in 2010. However,
according to the Texas Department of Insurance, industries with
higher non-subscription rates (such as Hotel and Food Services,
Professional Services, Health Care, Wholesale and Retail Trade, and
Transportation) may have been disproportionately affected by the
2008-2010 U.S. recession, and the temporary reduction in their
workforce. With the economy now on the rise again, these numbers
should rebound in the next 2 years.
Significantly, during the same period the percentage of Texas non-
subscriber employers increased slightly, from 32 percent in 2010 to
33 percent in 2012. Non-subscription percentage rates among large
employers rose from 15 percent in 2010 to 17 percent in 2012, while
some medium-sized employers (i.e., those with 50-99 employees)
also moderately increased their non-subscription percentage rates.
(See Table 5)
© 2013 by Paul M. Hood, P.C. Page 16
Table 3: Percentage of Texas Employers That Are Non-subscribers
by Industry (2012 estimates)
Industry Type Non-subscription Rate (2008)
Non-subscription Rate (2010)
Non-subscription Rate (2012)
Agriculture / Forestry 27% 25% 29% Mining / Utilities / Construction 28% 19% 22% Manufacturing 31% 31% 29% Wholesale Trade / Retail Trade / Transportation
29% 32% 26%
Finance / Real Estate / Professional Services
33% 33% 32%
Health Care / Educational Services 39% 32% 35% Arts / Entertainment / Hotel / Food Services
46% 40% 40%
Other Services (Except Public Administration)
36% 42% 49%
© 2013 by Paul M. Hood, P.C. Page 17
Table 4: Percentage of Texas Employers That Are Non-subscribers and Percentage of Texas Employees That Are Employed by Non-subscribers (1993-2012)
051015202530354045
1993 1996 2004 2008 2012
EmployersEmployees
© 2013 by Paul M. Hood, P.C. Page 18
Table 5: Percentage of Texas Employers that Are Nonsubscribers by Employment Size (1995-2012)
Employment Size (# of employees)
1995 (%)
1996 (%)
2001 (%)
2004 (%)
2006 (%)
2008 (%)
2010 (%)
2012 (%)
1-4
55
44
47
46
43
40
41
41
5-9
37
39
29
37
36
31
30
29
10-49
28
28
19
25
26
23
20
19
50-99
24
23
16
20
19
18
16
19
100-499
20
17
13
16
17
16
13
12
500+
18
14
14
20
21
26
15
17
© 2013 by Paul M. Hood, P.C. Page 19
Q: What About Texas Workers’ Comp Reform? A: In 2005, the Texas Legislature passed HB 7, which was
supposed to completely reform the state’s workers’ compensation
system. One of the purposes of HB 7 was to reduce the cost of
workers compensation insurance and, according to the TDI, average
premiums have come down about 50% since 2003. However, an
average industry-wide rate increase of 1.3% has been requested for
2012, and it seems likely that additional increases will be necessary
to cover projected losses and expenses, and produce the targeted
profit.
In regard to expenses, total medical costs for professional services
evaluated at six months post-injury increased by 26% since 2007.
Similarly, total hospital costs increased during the years 2005 to
2008, and have been marginally increasing since then. The average
professional cost per workers comp claim also increased significantly
– by 31 percent – between years 2007 and 2011. According to the
TDI, one of the primary causes for these increases was the expanded
fees-for-services rate structure in the TDI’s own 2008 professional
service fee guidelines.
© 2013 by Paul M. Hood, P.C. Page 20
Q: What Does Everyone Think About the Reform?
A: Although employees were able to access medical care faster in
2012, they still reported lower satisfaction levels with the care they
received than when compared to 2005. Additionally, a higher
percentage (25 percent) of employees surveyed in 2012 reported that
the medical care they received for their work-related injury was worse
than their routine medical care.
The satisfaction of non-subscribers with their programs remains very
high in four different survey areas: overall satisfaction (69%), good
value for the company (58% satisfaction), the ability to manage costs
(54.3% satisfaction), and the adequacy of benefits paid to injured
workers (47% satisfaction).
Employer satisfaction levels also vary by employer size. Smaller
nonsubscribers (fewer than 50 employees) had 63% overall
satisfaction, while companies that were medium-sized (50-99
employees) and larger (100+ employees) had satisfaction rates of
83% and 76%, respectively.
© 2013 by Paul M. Hood, P.C. Page 21
Q: What Do I Have to Do to Opt Out?
A: Effective January 1, 2013, all nonsubscribers must file the DWC
Form-005 between February 1 and April 30 of each year, unless their
only employees are exempt from coverage under the Texas Workers’
Compensation Act. Employers can submit the DWC Form-005 to the
Workers’ Compensation Division of the TDI (formerly the TWCC) by:
• filing electronically on the TDI’s website;
• faxing the form to the TDI; or
• mailing the form to TDI’s address at the top of the form. Non-subscribers must also notify their employees of the decision to
“opt out” with the TDI’s prescribed poster (the “DWC Notice 5”), which
should be placed in at least one prominent area such as a break-
room wall or bulletin board. We also recommend that the company
obtain sufficient insurance coverage to protect it in the event of a
workplace injury claim. The notice should be in English, Spanish and
any other language common to the employer’s employee population.
© 2013 by Paul M. Hood, P.C. Page 22
Q: What if I Don’t File My Form-005 or Post My Notices?
A: Since 2007, the TDI has brought the following enforcement
actions – and sought administrative penalties – against
nonsubscribers for to failure to provide requested information about
their workers' compensation coverage status:
2013 - $11,850 in fines 9 enforcement actions
2012 - $42,050 in fines 32 enforcement actions
2011 - $0 in fines 0 enforcement actions
2010 - $0 in fines 0 enforcement actions
2009 - $0 in fines 0 enforcement actions
2008 - $0 in fines 0 enforcement actions
The sharp-eyed observer may see a trend here, although in the grand
scheme of things, this is still not particularly aggressive enforcement.
Nevertheless, the TDI appears to be getting more serious about the
notice and filing requirements for nonsubscribers – in 2012, one
unlucky employer received a $10,000 fine! The lesson of all this is
that you should file the required forms and post the required notices.
© 2013 by Paul M. Hood, P.C. Page 23
Q: What Is ERISA?
A: The Employee Retirement Income Security Act of 1974 (ERISA)
is a federal law that sets certain standards for welfare benefit plans in
private industry. ERISA does not require any employer to establish a
welfare benefit plan. It only requires that those who establish such
plans must meet certain minimum standards. Employers who opt out
of Workers’ Compensation and who create a workplace accident
program for their employees are covered by ERISA. By complying
with the legal requirements of ERISA, employers can drastically limit
their exposure to any claims relating to such plans, or to the
distribution of plan benefits.
© 2013 by Paul M. Hood, P.C. Page 24
Q: What Does (and Doesn’t) ERISA Cover? A: ERISA covers disability and accident plans, including workers’
compensation “opt-out” plans, which provide medical, accidental
death and dismemberment, and disability benefits under one plan.
The person or entity that decides how to distribute benefits is called
the “plan administrator.” ERISA applies to any benefits that are paid
or distributed to employees who are eligible to participate in such
plans, as defined by the plan documents. ERISA benefits include
wage replacement payments, medical treatment and hospital bills,
disability compensation, accidental death or dismemberment benefits,
or anything else paid under a workplace plan.
ERISA does NOT apply to state-law negligence claims.
Therefore, an employer should not be led to believe that a non-
ERISA workplace injury claim will automatically be sent to federal
court, or covered by ERISA.
© 2013 by Paul M. Hood, P.C. Page 25
Q: Do I Need an ERISA Plan If I Opt Out?
A: Yes – By having a written ERISA plan in place and giving a
summary plan description to employees, many of the employer’s
legal duties under ERISA are satisfied. These written plans let
everyone know what their responsibilities are, and allow the employer
to have a great deal of authority in managing the plan itself. If there
is no written plan, then ERISA may already have been violated, and
the employer may be subject to substantial penalties. In addition, the
absence of any plan makes the employer extremely vulnerable to
ERISA claims for breach of fiduciary duties, or possibly even to state-
law claims for breach of contract or fraud! Having a written ERISA
plan is therefore not only legally required, it simply makes good
business sense.
© 2013 by Paul M. Hood, P.C. Page 26
Q: What Documents Do I Need to Comply With ERISA? A: Employers must have two fundamental documents that describe
the plan – a written plan document and a summary plan description –
each of which must meet the requirements of ERISA. While
employers that sponsor insured health plans generally have an
insurance policy, the policy often does not constitute a plan
document. The plan document controls the operation of the plan.
There are a number of provisions that should be included in the plan
document. ERISA requires that the plan document designate a
"named fiduciary," who must be either designated by name or in a
manner capable of being identified, for example, by title. The named
fiduciary has the authority to control and manage the plan's operation
and administration. The plan document must also describe how the
plan is funded and how benefits are paid under the plan. The plan
document should also include a description of the individuals who are
eligible to participate in the plan.
© 2013 by Paul M. Hood, P.C. Page 27
Q: What Does a Summary Plan Description Require?
A: It is not uncommon for an employer to have a summary plan
description that is inadequate, or even to not have a summary plan
description at all. However, ERISA requires that every plan
participant be furnished with a summary plan description, commonly
referred to as an SPD. The SPD is intended to summarize the plan's
benefits, rights and features in a manner calculated to be understood
by the average participant. Certain information must be included in
the SPD, including: the plan name; the plan sponsor's name and
address; the sponsor's employer identification number; the type of
welfare benefit plan; the plan year; the plan administration method;
the plan administrator's name, address and phone number; the agent
for service of process; eligibility requirements to receive benefits; a
description of available benefits; the method or source of
contributions to the plan; the method of funding; an explanation of
claims procedures; and a statement of ERISA rights.
© 2013 by Paul M. Hood, P.C. Page 28
Q: What If I Sell the Company?
A: In the event of restructuring, mergers, changes in circumstances,
and other cost-cutting measures, employers must be certain to
adequately advise current employees about reductions in, or changes
to, their welfare plan benefits. Under ERISA, employers can alter,
change or discontinue any of their disability and welfare plan benefits,
as long as proper notice is provided to covered employees. This does
not include plans that are part of a collective bargaining agreement.
© 2013 by Paul M. Hood, P.C. Page 29
Q: What About Negligence Lawsuits? A: One of the biggest reasons employers choose not to opt out is
the fear of being sued. This is understandable, BUT most increased
liability costs can usually be traced to a lack of attention to workplace
safety. In addition, according to a Princeton study, nearly 60% of all
nonsubscriber cases settle prior to trial, 38% of those tried result in
no award, and almost 88% of awards in non-fatal accidents are for
$70,000 or less. There is also “Tort Reform,” which limits the
amount an injured employee might recover, as well as subrogation
and off-set claims, which might allow the employer to recover some
or even all of the ERISA benefits that were paid. Finally, there is
employer liability insurance to cover almost all potential losses, as
well as the possibility of arbitration to avoid “runaway” juries.
© 2013 by Paul M. Hood, P.C. Page 30
Q: Why Would Someone Sue Their Employer? A: An injured employee might sue a non-subscribing employer in
state court for damages arising from a work-related injury because of:
• Serious injury. • Bad claims management.
• Disgruntled or litigious employee.
A typical negligence claim involves the employer’s breach of a work-
related duty, and has included:
• The duty to furnish and maintain safe and suitable tools and equipment
• The duty to hire careful and competent co-workers
• The duty to establish and enforce safety rules
• The duty to protect against foreseeable criminal acts of third
parties
• The duty to provide adequate assistance in the performance of required work
• The duty to instruct employees on safe use and handling of
products and equipment
© 2013 by Paul M. Hood, P.C. Page 31
Q: How Can I Avoid a Lawsuit?
A: The good news is that most people are not interested in hiring a
lawyer and suing their employer, and historically the number of cases
compared to the number of actual injury claims is extremely low. The
bad news is that anyone can file a lawsuit. Usually, if that happens it
either involves a serious accident that results in permanent
disabilities, or it occurs when an employee’s benefit claims go unpaid
and he has no other choice. Under our program, we encourage
employers to adopt a safety program, which can help reduce the
potential for a major catastrophe. In addition, we make every effort to
handle employee injury claims quickly and efficiently, to make sure
that bill collectors do not force injured workers into the arms of an
attorney. Finally, with ADR in place, most lawsuits can be sent to
mediation or arbitration, where the dispute is usually resolved quickly
and with a minimum of disruption at work.
© 2013 by Paul M. Hood, P.C. Page 32
Q: Do I Really Lose All My Defenses? A: A non-subscriber cannot defend against a negligence action by
claiming:
• Negligence of a fellow employee • Assumption of the risk
• Contributory negligence of the employee.
BUT – many defenses are still available, including:
• Self-infliction • Intoxication
• Employee was the sole cause of the accident
• Horseplay
• Detour/course and scope
• Employee simply doing her job
• Failure to ask for available help
• Improper use (or misuse) of tools or equipment
• Danger was obvious
• Employer merely created a “condition” that allowed accident to
occur
• Injury caused by third party (such as a parts manufacturer, another driver, etc.)
© 2013 by Paul M. Hood, P.C. Page 33
Q: How Can I Tell When a Claim Is Suspicious?
A: There are several “tell tale” signs that an injury may not be what
it seems. Usually an employee injury claim is questionable when it
includes three or more of the following indicators:
• The employee refuses to cooperate with medical personnel
• The employee refuses to return to work despite a doctor's O.K.
• The employee has history of reporting subjective injuries
• The injury “occurred” on a Friday and is reported on a Monday
• The claim occurs after the employee has been terminated
• The type of injury is unusual in the employee's line of work
• The employee does not promptly report injury to supervisor
• The injury was not witnessed by anyone
• The reported accident occurred where the employee does not work
• The details of the accident are vague or contradictory
• The employee says he can’t work but does other things that
require full mobility
Using the AIS program, an employer has a much better chance of
rooting out bogus claims and denying benefits, and managing claims
that are worthwhile and need attention.
© 2013 by Paul M. Hood, P.C. Page 34
Q: How Does ERISA Affect a Negligence Lawsuit?
A: No Collateral Source Rule – the amount of paid benefits may
offset a subsequent liability award. For example, if an employer has
paid for occupational accident insurance through its ERISA Plan, and
an injured employee receives benefits under that Plan, then any
negligence award would have to be offset by that amount for those
types of damages.
© 2013 by Paul M. Hood, P.C. Page 35
Q: How Does ADR Work?
A: ADR means “Alternative Dispute Resolution.” In practice, this
means that a company can adopt a plan to send nearly all workplace
disputes to mediation or, if that doesn’t succeed, to final binding
arbitration. ADR may not apply to all claims (such as pre-existing
disputes or certain administrative matters like unemployment claims),
and it may not apply to all employers (such as those with collective
bargaining agreements). However, in the vast majority of cases,
ADR is available and an extremely useful tool.
There are several reasons for choosing to adopt an ADR
program, including: (1) speed and reduced litigation costs; (2)
privacy; (3) the absence of a jury (and their sometimes emotionally-
driven verdicts); (4) the “expert” status of most mediators or
arbitrators, which allows them to bring their own experience to the
resolution of a dispute; (5) the increased potential for settlement that
results from most mediators’ or arbitrators’ direct involvement in the
process; and (6) greater informality, which allows parties to get to the
heart of an issue.
© 2013 by Paul M. Hood, P.C. Page 36
Q: What Is Mediation?
A: Mediation is often the most straightforward and cost-effective
method of examining and resolving disputes. It is a meeting in which
a neutral third party, called a mediator, helps the parties come to an
agreement based on everyone’s needs and interests. Mediation
helps primarily by opening up communication and by coming up with
options. It is a non-binding process. That means the mediator can
make suggestions, but the employee and the employer are
responsible for mutually resolving the dispute.
© 2013 by Paul M. Hood, P.C. Page 37
Q: What Is Arbitration? A: Arbitration is a process in which a dispute is presented to a
neutral third party, the arbitrator, for a final and binding decision. The
arbitrator makes this decision after both sides present their
arguments at the arbitration hearing. There is no jury. The arbitration
service provider runs the proceedings, which are held privately.
Though arbitration is much less formal than a court trial, it is an
orderly proceeding, governed by rules of procedure and legal
standards of conduct.
© 2013 by Paul M. Hood, P.C. Page 38
Q: What Does a Good Non-subscriber Program Contain? A: Non-subscription is not for everybody – dangerous jobs,
employer unconcerned with safety, transient workforce, extensive history of claims.
• Adopt an ERISA Plan and comply with the TDI’s disclosure and
administrative requirements • Implement a safety program that includes regular audits, safety
training and testing, and assessing existing safety needs
• Communicate regularly with injured employees and create a “light duty” or “back-to-work” program
• Establish an ADR program, which includes mediation and
binding arbitration
• Obtain liability or other insurance, which will cover all or a substantial portion of any negligence award.
© 2013 by Paul M. Hood, P.C. Page 39
Please contact AIS for all of Your Non-subscription needs.
Accident Insurance Services, Inc. 9330 LBJ Freeway, Suite 300
Dallas TX 75243
Telephone: 972-991-0413 Toll-Free: 800-880-2515 Facsimile: 972-788-5108
http://www.ais-insurance.net
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