Many small businesses are operating today without any liability insurance. Workers’ compensation insurance is mandatory by law. Many business owners want to reduce operating costs. However, in today’s environment where worker compensation claims are on the rise, it is highly risky to operate without liability coverage.
What took years to build up can be destroyed by one single claim. The business could take a significant hit due to litigation and the owner’s personal property may become vulnerable. According to the Bureau of Labor Statistics in 2007, there were over 335,000 employees who were injured at work by contact with equipment and objects.
Workers’ compensation is required in every 50 state to protect employers from liability in the event of an accident involving employees. This coverage covers medical expenses as well as lost wages for employees who are injured. It will pay a lump sum, or annuities in the event of disability. Employers should review their general liability policies to make sure they are adequately covered against any claims for property or bodily injury. The coverage should cover medical expenses, defense of the lawsuit, settlements, appeal procedures, bonds, or judgments.
The premiums for Professional and General Liability insurance can be expensive and businesses are often discouraged from buying it. However, the cost of running a business without liability insurance could be even more costly. A claim can quickly escalate in cost and can lead to severe financial consequences for a company. Employers will be responsible for legal and medical fees if a worker is injured on the job. The company will be protected by worker’s compensation insurance. This is required at different levels depending on the state.
No insurance costs
The Bureau of Labor Statistics published a September 2007 report on employee compensation. Employers paid an average of $28.03 per hour for employees. These costs included approximately $2.35 (8.4%) of total compensation. This is a small amount compared to the cost associated with disputing or paying a claim.
The cost of a lawsuit can vary greatly depending on many factors, including the type of claim and whether it was brought by a customer or an employer. The defense of a case can be costly for employers. Costs and procedures typically include:
* A complaint and summons against the company is filed. This results in many meetings and attorney fees. These include consultation, transcript, and research costs. All of these are charged at an hourly rate.
* The claim will now move to the deposition phase. This involves a settlement conference as well as a trial date. The attorney will bill for deposition paperwork as well as the billable hours.
* The attorney charges an hourly rate during the trial. It’s impossible to predict how long it could take. The trial could last several days or even weeks. The defendant will be charged for several legal fees in addition to the hourly fee.
* Legal fees may include witness fees, transcript fees, court reporter fees or consultation and deposition fees.
If the employee wins, the defendant, or the employer, will bear the cost of paying not only the settlement but any legal and medical expenses incurred by the prosecution party. This can lead to major debt and bankruptcy for those companies that do not have insurance.
A California workers’ compensation case brought forth the need for a wood products company to not only pay their employees medical bills but also to provide “…medical care as necessary to “relieve” him from the effects of an industrial injury. However, the company had insurance coverage so they didn’t have to pay.
In another case, in 2006, an employee with fibromyalgia suffered from industrial injuries to his neck. He was awarded medical costs in excess of $14,000 and a disability of nearly $100,000. Plus, he received a life pension of just over $45 per weekly.
Protection of assets
Insurance covers more than worker-related claims. Insurance can also be used to cover natural disasters like fires, floods, and theft.
According to the Los Angeles Times, compensation awards are being made to victims of the Metrolink train accident in Chatsworth. It is expected that the awards will easily surpass the $200-million limit Congress placed on railroad liability for any single accident. Metrolink will be extremely vulnerable if the cap is lifted.
Although most businesses won’t experience a catastrophe of this scale, it is possible for organizations to have additional insurance beyond workers’ compensation insurance. This will help ensure that the company’s assets are not damaged. The workers’ compensation insurance quote should detail the coverage. The business owner can then determine if additional liability insurance is required. Liability insurance coverage typically includes:
* Legal costs – general liability insurance will pay for litigation costs, such as attorney and witness fees as well as settlement payments.
* Medical expenses – Insurance will pay for medical expenses for employees and customers who have been hurt on company property.
* Property damage – insurance will cover fire, theft, or other events that cause damage to the business’ assets. It protects both the company and the customer from any physical damage to their property.
* Business interruption – insurance will protect the business from major disasters such as fire that could render it inoperable. The insurance will reimburse the company for any losses or profits made while the business was closed.
To find the best insurance for your business, you should shop for established and well-respected providers. To help companies budget for this expense, all insurance providers can offer general liability and workers’ comp insurance quotes.
