Workers’ Compensation Insurance: Do I need coverage?

Workers’ Compensation I…

When your business is first starting, and it's just you and maybe your significant other or an old friend from school, you probably aren’t thinking about whether you need Workers’ Compensation coverage. Candidly at that point if it’s just the two of you, you would be safe focusing on getting the business off the ground as workers’ compensation coverage wouldn’t be required. In Virginia, if you have more than two employees, including the owner, you must provide workers’ compensation coverage. In this situation: it is only the two employees so coverage isn’t an issue yet. This entire analysis takes a drastic turn however, if you add just one more part-time employee. To be sure, it is a great day when you can grow your business; when you are able to hire another mechanic, another driver, an office manager or a secretary. While hiring more employees is a great sign of success and growth, it is also a strong indicator that you may need to look at the foundations of your business and help protect the employees that you are relying on day-in and day-out.

There are a multitude of options when it comes to selecting coverage. Your industry and the nature of your work may play significant roles in helping you determine what kind of insurance would work best for you. In some instances, a large enough business can benefit greatly from operating through a self-insured or captive program. Other businesses are better off simply getting the coverage and allowing the insurer to address substantive matters of coverage and claims. There are even some businesses that are exempt from requiring coverage, though these are often specific to certain fields. Never presume that you don’t need coverage simply because it hasn’t been requested or suggested.

At this point, I strongly suspect that several of you are thinking: “I know what I’ll do! I’ll just have them all declared and paid as independent contractors! That way they get more money up front, and I don’t have to treat them like true employees and I can avoid that extra expense of workers’ compensation coverage!” Please don’t opt for the “easy” way out. Virginia will require you to count independent contractors as “employees” for purposes of needing coverage if they are engaged in the same work as your business. If you are a trucking business and they are a truck driver, you will likely need to include them in your estimation of employees for purposes of determining whether you’ll need workers’ compensation coverage, even if they may not be eligible for coverage under your policy.

What if I decide to just not get coverage?

It’s a practical question that many business owners may run with. Virginia can penalize you for failure to have proper coverage. Virginia code 65.2-805 can have a civil penalty assessed against the employer of up to $250.00 a day, and subject to a maximum civil penalty of $50,000.00. By comparison, some industries may be able to afford workers’ compensation coverage per month for less than the daily penalty. Additionally, failure to have coverage can also make the employer potentially liable directly to the employee in the event of an injury. There are numerous business advantages to having this coverage.

If you find yourself in a scenario where you think you may need coverage, if you have questions about what options are out there, or maybe you want to discuss why workers’ compensation may be of any relevance at all, you can contact the attorneys at Setliff Law, PC. We want to help you not only understand why you need this coverage, but why you want this protection. If you have questions related to this article, or if you would like more information about workers’ compensation in general, please contact John Stacy ( at (804) 377-1263, or Steve Setliff ( at (804) 377-1261.