Sale of Workers' Compensation Alternatives

Workers' compensation coverage is not mandatory

Texas remains one of only two states in the United States where employers may elect not to carry workers' compensation insurance with limited exceptions. When an employer decides to reject the workers' compensation act, other coverages may be available to cover some of the expenses related to employee injury. These products include accident and health policies and employers' excess indemnity contracts. Providers of such policies must exercise care in the promotion and sale of these to employers without workers' compensation insurance.

Rules require disclosure

Texas Department of Insurance rules forbid the promotion of insurance products to act rejecters by representing them as substitutes for workers' compensation insurance. In addition, certain disclosures are required. The rule specifically forbids representations that the coverage provides the same benefits as workers' compensation insurance or that employees are limited to coverage under the policy as the sole remedy against the employer.

The following statement in 10-point, bold-faced type must be included on the first page of the policy and on the first page of all materials used in advertising, marketing and explaining the policy, when marketed to employers that have elected, or may in the future elect, to reject the Act, and when such policy either provides benefits to employees or provide employers liability coverage or indemnifies employers for costs of job related employee injuries:

THIS IS NOT A POLICY OF WORKERS' COMPENSATION INSURANCE. THE EMPLOYER DOES NOT BECOME A SUBSCRIBER TO THE WORKERS' COMPENSATION SYSTEM BY PURCHASING THIS POLICY AND IF THE EMPLOYER IS A NONSUBSCRIBER, THE EMPLOYER LOSES THOSE BENEFITS WHICH WOULD OTHERWISE ACCRUE UNDER THE WORKERS' COMPENSATION LAWS. THE EMPLOYER MUST COMPLY WITH THE WORKERS' COMPENSATION LAW AS IT PERTAINS TO NONSUBSCRIBERS AND THE REQUIRED NOTIFICATIONS THAT MUST BE FILED AND POSTED.

Certificates issued to employees on group policies must include the following statement in 10-point bold-faced type on the certificate:

THE INSURANCE POLICY UNDER WHICH THIS CERTIFICATE IS ISSUED IS NOT A POLICY OF WORKERS' COMPENSATION INSURANCE. YOU SHOULD CONSULT YOUR EMPLOYER TO DETERMINE WHETHER YOUR EMPLOYER IS A SUBSCRIBER TO THE WORKERS' COMPENSATION SYSTEM.