Failure to Carry Workers’ Comp Insurance – A Serious Mistake

By Levi S. Wolf, Esquire

Wolf, Baldwin & Associates, P.C.

It is surprising in this day and age how many employers fail to carry workers' compensation coverage for their employees. The consequences of not having workers' compensation coverage are serious, and can be severe. Because of these consequences, employers should take a moment to double check their coverage.

All employers in Pennsylvania are required to cover their employees with workers' compensation insurance. Even if an employee is hurt in her first hour on the job, workers' compensation law applies. Devastating injuries can and do occur even before a person is properly trained on machinery, or simply by slipping on ice on the first day at work. Workers who are hurt on their first day on the job are entitled to the same protections as workers who have been on the job for many years.

Because injured workers' rights are significantly limited by the Workers' Compensation Act (i.e. they cannot sue their employers for negligence if they are properly covered by workers' comp), the legislature was serious about making sure that employers comply with the Act. For instance, 77 P.S. § 501(b) is a section of the Act which provides that if an injured employee is entitled to an award of compensation, any employer who fails to cover the employee with appropriate workers' compensation insurance can be found guilty of a misdemeanor of the third degree, carrying a potential $2,500 fine and up to a year in jail. If the failure to comply is found by the court to be intentional, the employer can be guilty of a felony of the third degree, carrying a potential $15,000 fine and up to seven years in jail. Each day of failing to carry the proper insurance can be an additional criminal count, adding to the potential fines, penalties, and jail time.

Not only can an employer be held criminally liable for violating the Act by failing to carry appropriate insurance, but the employer can be required to pay hefty expenses by having to deal with the claim. If an injured worker files a Claim Petition with the Bureau of Workers' Compensation, and the employee is not covered by workers' comp insurance, the employer may have to pay much more than the wage loss and medical benefits normally associated with paying on the claim. For starters, they will have to pay their own private attorney to represent them in court rather than have an attorney assigned by the insurance company. A smart claimant's attorney will also file a Petition for Penalties against the employer, seeking up to a 50% penalty based on the amounts owed to the claimant, for the employer's violation of the Workers' Compensation Act by failing to carry the required insurance.

Employees today are somewhat protected by the Uninsured Employers Guaranty Fund, which provides benefits to injured workers whose employers did not carry workers' comp insurance. But when the Guarantee Fund pays out benefits to those workers, it aggressively seeks reimbursement from the employers who shirked their responsibilities, including costs of litigation, interest, penalties, and attorney fees.

Lastly, employers which fail to carry workers' comp coverage do not have the protections of the Workers' Compensation Act as a shield against negligence liability. Injured employees can sue uninsured employers under civil tort law, exposing employers not only to wage loss and medical claims but also pain and suffering damages.

All of these potential penalties and risks certainly justify employers taking a few minutes to double check their workers' compensation coverage. An ounce of prevention is indeed worth a pound of cure.

Workers' compensation law is complex and challenging, even to experienced practitioners. Employers should contact their insurance carriers with questions. Injured workers who fear that their employers are not covered by workers' comp insurance should contact a Pennsylvania certified workers' compensation attorney right away, so that all of their rights are properly preserved.

Levi S. Wolf, Esquire is a shareholder in the law firm of Wolf, Baldwin & Associates, P.C. with offices in Pottstown, Reading, and West Chester. He is certified as a specialist in the practice of workers' compensation law by the Pennsylvania Bar Association's Section on Workers' Compensation Law as authorized by the Pennsylvania Supreme Court, and focuses his practice on workers' compensation law and family law. Mr. Wolf can be reached at 610-323-7436 or by e-mail to Lwolf@wolfbaldwin.com.