6 Gaping Work Injury Insurance Holes That Could "Gut" Your Restaurant
34% of Texas restaurant owners are practically begging a busboy to bankrupt their business and they don’t even know it.

You've seen it. Restaurants fail all the time for a lot of reasons. There is enough risk in business without needless risk. This report will reveal 6 of the biggest holes in workers comp "alternate" policies -problems that can be fixed. All too often I find restaurants standing naked in a cactus patch when it comes to this coverage, -a whole new definition of "exposed", but first a little introduction is required.

Texas insurance is just plain different. No other state allows a business to drop out of the Workers Comp system but here, most restaurants do. The last state survey estimated 52% of the Foodservice and Hospitality industries drop Comp. I've heard estimates inside the restaurant industry closer to 2/3! Since employee injuries are the number #1 most common insurable loss in a restaurant it's an issue you've got to address effectively.

In Texas, by law you must decide what you are going to do about workplace injuries. Each option has a number of legal ramifications for both you and your employees. You can:

1)

Buy "Real" Workers Compensation and be a part of the "system" where your employees receive the benefits that are prescribed by the State (but the premium isn't cheap), or

2)

Formally Reject the protection of the Workers Comp Act by filing as a "non-subscriber" -then most business owners buy another kind of insurance. People call it different things, an "alternate" to workers comp or "occupational accident" insurance. Those policies are not standardized like "real" Workers Comp. They vary drastically in price and coverage from one company to the next and they usually involve compliance with other federal and legal programs like ERISA (Federal laws governing employee benefits) and binding arbitration. (Warning – most agents don’t like this coverage so they don't do it very well but most restaurants do like this approach!) Frankly, there are some really lousy policies out there. There are also some good ones that are about 1/3 the cost of "real" Workers Comp. That's 67% OFF!

Gaping Hole #1: Not Deciding.

It's like tap dancing on a land mine - a legal combination of the absolute worst of the 2 options above. If your employees can show that you didn't follow the legally required process to notify them about not being a part of the Workers Comp system, you could owe them generous Workers Comp benefits without having a policy to pay for it (does unlimited medical bills and years of lost income sound expensive?). Lots of restaurants don't file the forms and don't buy any insurance. There really are inexpensive options. Call us or go online now for a FREE, no-obligation quote.

Gaping Hole #2: Not Filing.

The fines for not filing could be up to $500 per day. Enforcement in the past has been lax, but the Texas Department of Insurance recently announced it would begin enforcement June 8, 2008 to comply with new legislation requiring them to report compliance to the Legislature. As mentioned above, there are also huge potential legal risks for not filing. Call and ask about our FREE Filing Reminder Service. Annually, you will receive the updated forms and notices by email with instructions. It is a service for friends and customers of the InsuranceChef.com program.

Gaping Hole #3: Not Long Enough.

Think your work comp "alternate" policy provides good benefits for injured employees? Hint– Picture your injured employee hurt and watching attorney commercials on daytime TV when the postman delivers news "your benefits ended" …not pretty. Many policies cut off wage replacement benefits before the statute of limitations for filing a lawsuit against you run out. Let us do a free Insider checkup of your policy.

Gaping Hole #4: No Liability Coverage.

We see it often. The owner may think his General Liability will take care of an employee lawsuit. General Liability won't help and many of the "alternate" policies don't either! Now I am certainly in favor of providing benefits for employees, but "job 1" for us is to protect the owner! The "alternate" work comp market is kind of the "wild west" in insurance. The best policies are often very new and every one is different! Sometimes agents who sell to restaurants are only licensed to sell the employee benefit coverage so they never even show you a policy with employer liability protection. "Benefit only" deals are like buying only 1/2 a policy -usually for almost the same cost as one that protects your business from costly litigation.

Gaping Hole #5: "Illegally Hired" exclusion.

There is some real irony here. Most restaurant owners will admit they don't really know if some of their kitchen help is "illegal". After all, who can trust the social security numbers you get from low wage employees these days when they can buy a card on the street corner? Even if you didn't know he was illegal, most of the policies out there won't insure him …and even worse, 98% of the policies out there won't protect you if you are sued by an illegal! That injury can be just as bad and the lawsuit just as big! Call for a free quote to fix this. We're usually cheaper!

Gaping Hole #6: Not Enrolling Employees.

This one is the double whammy -paying for coverage and not getting it when the letter shows up saying you've been sued! Sorry, but this "hole" takes a little explanation. Virtually all workers comp "alternate" programs have both a policy and 2 contracts all tied together. No other restaurant policies are like them. The policy is between you and the insurance company where they are agreeing to pay YOU for insured losses. Both contracts are each between you and your employees. The first contract is a Welfare Benefit program where you contractually agree to pay your employees injury benefits subject to ERISA (Employee Retirement Income Security Act of 1974) laws. The second contract between you and your employees is an Arbitration Agreement where, as a condition of their employment you are telling them they are required to arbitrate any injury dispute rather than file a lawsuit against the business. ERISA says you are supposed to inform the employees of their benefits in writing. The insurance company is usually more concerned about making sure employees are informed about the Arbitration Agreement. Many employers do neither. …Big mistake. One company will make you pay a penalty of 25% of the claim if you don’t have an employee signature on file. Others will void your Liability protection. Better policies are available. And the InsuranceChef.com program includes employee enrollment assistance.

I am sometimes asked, if an "alternate" policy is "just as good as Workers Comp"? – We sell a lot of alternate and real Workers Comp and the truth is no "alternate" policy in the market has the same protection of Workers Comp - none. When you decide to reject the Workers Comp Act, business liability risk increases and employee benefits decrease. But, a well designed "alternate" policy can do a great job for you at a fraction of the cost! That is why so many restaurants do it. ...usually around 1% of forecasted payroll for a million dollar limit policy. It really pays to do it right. Strange as it may seem, lousy policies are usually older forms that actually cost more than the best ones. Find out how to minimize the risk if you are not going to buy real Workers Comp.

You invest a lot to get a restaurant going and I'm not just talking about cash for the kitchen equipment. You are inundated with decisions to open your business -from the theme and menu to the number of forks and color of chairs. The time, energy and financial investment continue and increase when your doors are open and you are moving toward success. Don’t risk it all.


Sincerely,

Kent Hagood, CIC, CRM
Certified Insurance Counselor, Certified and Licensed Risk Manager


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