Non-Insured Workers’ Compensation Claims

An Employee Has Filed a Claim for On-the-Job Injury, But I Don’t Have Workers’ Compensation Insurance–Now What?

8.30.2014

M. Greg Crumpler

Pursuant to the North Carolina Workers’ Compensation Act (the “Act”), an employee injured as a result of an accident arising out of and in the course and scope of his employment is entitled to recover from his employer workers’ compensation benefits, which can include lost wages, permanent partial impairment, and medical expenses. Many small business (corporations, partnerships, and sole proprietors) may be unaware that they are subject to the requirements of the Act, and the failure to have workers’ compensation insurance coverage for such an event can result in financial ruin for the company and criminal charges against the business owner.

Every employer who regularly employs three or more employees is subject to the provisions of the Act, and all corporate officers are to be included for calculating the number of employees.  N.C.G.S. §97-2.  Therefore, even a small corporation with a president, secretary, and one employee will be subject to the Act.  With limited exceptions, all employers who are subject to the Act must have in force a workers’ compensation insurance policy to provide coverage for claims asserted by injured employees, N.C.G.S. §97-93, and the failure of an employer to have such coverage will subject it to liability in a civil action for all compensation which the employee would be entitled to recover under the Act.  Specifically, the employee would be entitled to recover temporary total disability benefits (lost wages while out of work due to the injury), permanent partial or permanent total disability benefits (for loss of body parts or complete inability to return to work), medical expenses, and in the case of a fatality, death benefits to the employee’s dependents.  Depending on the severity of the injury and the attendant medical expenses, the liability of an employer could total in the tens of thousands, if not hundreds of thousands of dollars.

In addition, any employer subject to the Act who fails to secure the payment of compensation to an employee (i.e. fails to have in force a workers’ compensation insurance policy) faces a mandatory fine of up to $100.00 for each day it was required, but failed to have insurance coverage. Any employer who willfully fails to secure payment of compensation may be criminally prosecuted for a Class H felony.  Furthermore, any person with the ability and authority to “make” the employer obtain a workers’ compensation insurance policy (such as the president of a corporation or owner of a company), may be prosecuted for a Class H felony or Class 1 Misdemeanor and be personally liable for a penalty of up to 100% of all workers’ compensation benefits owed the injured employee.  Therefore, it is imperative that any business (be it a corporation, a partnership, or a sole proprietorship) that does not have a workers’ compensation insurance policy consult with an attorney to determine whether it is subject to the Act, and if so to immediately obtain workers’ compensation insurance coverage.

Similarly, a non-insured employer who finds itself faced with a claim asserted by an injured employee should immediately seek assistance from an attorney experienced in handling non-insured workers’ compensation cases.  Specifically, a complex interface with the employee’s attorney, the employee’s healthcare providers, and the Fraud Unit of the North Carolina Industrial Commission will be required in order to achieve a successful resolution of the claim, which hopefully could include a substantial reduction of the fine, reduction (or possible elimination) of the civil penalty, and the avoidance of criminal charges.