Most
insurance people think it's just plain
crazy. We don't, but you should
know that not buying a Workers Comp policy
isn’t
just trading one kind of policy for another...
You are actually changing the legal
standing of your business and your
employees. Not being a part of Workers Comp
gives your employee a right to sue that they
didn't have under "real" Workers
Comp and it means you are giving up your
Common Law defenses (e.g. Assumption of Risk,
Fellow
Servants Fault and Contributory Negligence)
if sued by an injured worker. -You
go to court with one hand tied behind your
back! This report answers the question "Why
do most Restaurant owners leave the system? Are
they NUTS?"
You've got to read my other free report on this subject 6
Gaping Work Injury Insurance Holes that could Gut Your Business because
the answer is a little twisted. YES, IF they don't
do it right they could easily be kissing their business
goodbye!
I'm
going to get to the "nuts" question
but, as in the other report a little
introduction to this complicated subject
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 Food service
and Hospitality industries drop Comp.
I’ve heard estimates inside the
restaurant industry closer to
2/3! Since employee
injuries are the #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.
As mentioned each option has a number
of legal ramifications for both you and
your employees. You can:
1)
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Buy "real" Workers
Compensation and
be a part of the "system" where your employees
receive the benefits that are prescribed
by the State. "Exclusive Remedy" doctrine
really limits your employee's ability
to sue because by working for you they
are agreeing that Comp benefits are almost
their only recourse (but the premium
isn'’t cheap).
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2)
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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 and it
really pays to get the right
one!
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3)
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Not
Decide. 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.
By
the way, the risk & possible fines
are why offer a 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.
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So
if "bailing out" of the Workers
Comp system is so risky,
Why do so many people do it??
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Sizzling
Reason #1: Cost
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A
good "alternate" policy is
cheap! The 2009 "Benchmark" rate
for "real" Workers Comp is
3.44% of payroll. Now, you'd get some
discounts for premium size and good experience
and there are some dividend plans that
will give some of your money back if
you "keep your nose clean",
but starting out... do the math! That's
expensive, particularly when we see rates
in the neighborhood of 1% for an "alternate" with
a million dollar limit! We often see
proposals at HALF or A THIRD
the cost of "real" Workers
Comp! That much savings is hard to ignore
when food costs are up, competition is
up and margins are getting skinny. Call
us or go online now for a FREE no-obligaton
quote.
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Sizzling
Reason #2: Control of False Claims
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How
many times have you heard this story?
The employee gets drunk and falls off
his own tailgate on Sunday night, so
he limps in the door and "toughs
it out" long enough to fake a Workers
Comp injury when "no one was watching" on
Monday morning. Bingo, the benefit bell
just rang at your expense! He probably
doesn't even report the injury till a
few days later when you ask him why a
nurse called looking for your policy
number. Workers Comp is a kind of "no-fault" system.
In Comp the insurance company will tell
you they have to be able to prove the "incident" didn't happen – tough
(and expensive) to prove so 90% of the
time, even the best "real" Workers
Comp carriers will pay the bills and
ultimately, you pay even more in premium! "Non-subscribers" often
control this with additional
employee reporting requirements and if
the "incident” sounds really
suspicious or if they can collect the "Sunday
night story" from other employees – they
deny the claim! – Easier to do
in a less regulated environment and cheaper
in the long run for the Owner!
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Sizzling
Reason #3: Control of Physician Selection
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Now
I like some Chiropractors. I've seen
them do some amazing things for a back
injury that would have had an MD sharpening
his carving knife and firing up the lights
in the operating room. It can be a lot
less invasive. --But there are those
other guys... you've seen them advertise
during those "Judge" shows
on daytime TV. It is Insurance Fraud
like #2 above, but they do it. It's amazing
how much "worse" the injury
gets after the first 20-minute "consultation" with
a ChiroQuacktor. I guess they're no good
at real medicine so they make their money
stretching out Workers Comp injuries
at 3 "treatments" a week ...forever
...and ever. Workers Comp has gotten
better at this in the last few years
with the legislature approving Preferred
Provider Organizations, but non-subcribers
can create their own Physician network
if they want. –Amazing
that there don't seem to be any ChiroQuacktors
on the list!
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Sizzling
Reason #4: Control of Coverage
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"Real" Workers
Comp usually provides better benefits
to the injured employee, so why would
I say Coverage is a reason to buy an "alternate"?
Many businesses feel that the benefits
in Workers Comp have run wild! Remember
that "no-fault" type system?
The employee doesn't have to prove that
the employer did anything wrong in order
to be paid – the injury just has
to happen on the job. If the Owner
didn'’t do anything wrong to cause the
injury, is it "reasonable" to
pay an unlimited amount of medical bills and
years of wage replacement? I mean really,
if lightning struck a customer in the
parking lot, would you owe him?
Well, that's the logic. Many businesses
feel a moral obligation to provide a reasonable
benefit to care for their employee
but also believe a huge claim should
only be paid if he did something wrong.
Let the employee sue if he thinks he
can prove negligence! Afterall, that's
how it works with customers or other
forms of public liability. I have also
known of businesses who used the cost
savings of more reasonable work injury
benefits to do other things like Health
Insurance or Profit Sharing. This subject
should be considered in the context of
overall compensation and benefits.
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Sizzling
Reason #5: Burden of Proof against Hurdles
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This
is another of those issues that relate
to the legal differences of being in
or out of the system. The way Workers
Comp is set up there is a lot less legal
risk in Comp. Prior to the 1992 Texas
reforms, there used to be a lot of attorney
involvement to decide the amount of payments
owed. Afterward, that reduced drastically.
The real lawsuits (actual tort litigation)
that have been successful have been limited
to just a handfull since 1913 – but
the benefit cost of paying claims is
huge! On the other hand, with
an "alternate" policy the liability
increases (remember the 1st
paragraph of this report) but
the benefit costs decrease. That's
why it's a lot cheaper! In an "alternate" plan
the employee has the burden of proving
1) an injury 2) employer negligence and
3) that the negligence was a proximate
cause of the injury. In short, he's got
to have a case to win. – The case
is easier to prove if he can get it to
court (again, paragraph 1) but
getting it there is no "cake walk".
I
know, you are thinking "plaintiff
attorneys are a dime a dozen",
but there are additional hurtles they
have to jump. The next is binding arbitration.
Most plans have you make arbitration
a condition of employment. The employees
agree (in writing and by accepting
a check) that they will go to independent
binding arbitration rather than court.
Most Owners and their insurance companies
feel this takes a lot of "topside" out
of the risk. Then, there is the gift
of our legislature – Tort Reform!
That reduces topside Risk even if there
is Gross Negligence by the Owner. All
this is strikingly different than "real" Workers
Comp where practically the only knowledge
an agent needs is the price and pay
plan. It can really pay to use an agent
that really knows this stuff.
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Sizzling
Reason #6: Self-Insurance Flexability
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A
workers comp "alternate" isn’t
just for small restaurants, in fact large
employers usually value the control and
deregulation aspects much more than smaller
operations. True Workers Comp
Self Insurance doesn't happen often in
Texas because the requirements (filings,
financials, reserves, etc.) are almost
as bad as being an insurance company.
Large deductible plans aren't as bad
and are far more common, but the Carrier
has the legal obligation to pay the claims
so you usually have to put up a lot of
money as a claim reserve and have very
little influence over claims handling
and reserve setting. As a "non-subscriber" you
can buy 10, 20, 25 Million in coverage
and choose very large "retentions" (like
a deductible) and hire an administrator
to process your own claims. –Very
little government red tape or controls.
We've helped clients with hundreds of
locations and thousands of employees
do these arrangements. Call or email
us to do a feasibility Study. We can
analyze your claims, suggest retentions
and pull the insurance, legal and claim
service team together for an effective
overall strategy.
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Sizzling
Reason #7: Compassionate Involvement
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More
control can mean more direct involvement.
Under an "alternate" plan many
medium and larger businesses pay lost
wages directly, even if they are being
reimbursed by the insurance company.
They are personally involved in recovery
follow-up and return to work programs. With
an "alternate" program they
can be personally involved and
the employee knows they care. The
claim costs go down, the employees return
to work faster, and employee
moral in the company goes up. It’s
a real win-win situation if the employer
is staffed to do it.
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Running
your business is more than a full time job. You
don't have the time to keep up with every new law
or trend in the insurance industry. Workers
comp "alternatives" are changing almost
as fast as the Texas weather. Be a smart
consumer. Protection for you and your business
requires constant vigilance....and a partnership
between you and a professional agent that knows
your business. For the latest information on how
to save money AND get the best protection for yourself
and the people you care most about contact
us.
Sincerely,
Kent
Hagood, CIC, CRM
Certified
Insurance
Counselor,
Certified
and
Licensed
Risk
Licensed Restaurant Insurance Specialist, "Executive Chef" of
InsuranceChef.com
PS:
Let's be perfectly clear what you're getting
here. No-nonsense advice on Texas
restaurateur's biggest insurance question -then
the best pricing and specialized
service and protection you can buy... period.
Awfully brash to say but no one does this
better, honest. We'll give you a "no-nonsense" evaluation
of "real" or "alternate" workers
comp. Then, we'll give you a free no-obligation
quote on either or both. It just
takes 5 minutes of your time.
PPS: I can usually have your free no-obligation quote faxed
or emailed in just 72 hours or less. Call us or use the Easy Fax Back
Quote Request form at the end of this report.
PPPS: Check another of our FREE reports. Just click on a menu
button to the right and print to read later. You won't get this kind
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© 2008-2009 Risk Strategies, Inc. The reader is encouraged to consult
their insurance directly concerning any related issue and the reader
assumes all responsibility for their own actions relative to any items discussed
in this report. Adherence to all applicable laws and regulations (federal,
state and local) governing the use of any product or service described
in this report is the sole responsibility of the reader. The author assumes
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