Workers’ Comp Insurance in North Carolina

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Why Do You Need Workers’ comp?

North Carolina Workers’ compensation insurance is a no-fault insurance system that guarantees immediate medical and disability benefits for employees and protects employers against civil lawsuits for damages. You need North Carolina Workers’ Comp Insurance to protect your employees in the event of illness or injury occurring in the course of employment.

The no-fault system guarantees workers immediate medical care and payment for lost wages. In exchange, the workers surrender their right to sue for damages. You need coverage to protect your business and personal assets against the high costs of medical care and disability for injured or ill workers.

Buying Workers’ Compensation in North Carolina

You can buy insurance on the open Market, in a self-insurance group, and through carriers assigned in the North Carolina Workers’ compensation Insurance Plan. If you are a large, well-established company, you may find the best result in self-insurance financing with third-party administration. Many medium and small firms get the best prices and coverage through self-insurance groups.

Instructions for Buying

The open market is the first place to look for insurance coverage unless you wish to self-insure. The open market offers competitive pricing and firms can compete for your business with low prices and discounts. New firms, those with a short record, or a high incidence of claims may not get offers from private insurers. The North Carolina Workers’ compensation plan is the insurer of last resort; they will accept all qualified applicants.

To self-insure you must prepare and submit an application to the Department of Insurance. They will assess audited financial statement, safety records, loss and claims history, the modified experience rating, and any past insurance policies that you have held. If approved, you will have to post security and provide excess liability coverage. The state must also approve third-party administration of any essential process such as claims, or the medical care network.

What You Should Know About Workers’ comp in North Carolina

There are details to consider in counting to three employees, eliminating the risk of liability for independent contractors, and resolving coverage questions for employees of subcontractors. The prime employer is liable until it is clear that the sub has insured its employees. Once in receipt of proof of insurance, the prime will not face liability unless it knows that the coverage has lapsed or expired. The best practice appears to be to monitor compliance by subcontractors and check thoroughly for details like terms of coverage. The state provides an online mechanism to check coverage.

Is Your Business Required to Carry?

North Carolina law requires every employer with three or more employees to carry workers’ compensation coverage. Counting to three can be difficult under North Carolina law. Corporate officers may elect to be excluded from coverage; however, they still count as employees when determining whether the business passed the coverage threshold of three regular employees.

Individuals who are sole proprietors, members of LLCs, and partners are not automatically counted as employees. Executive officers, directors, or committee members of a non-profit corporation are also not automatically counted as employees. There is a special test and particular requirements involving corporate control under the North Carolina General Statutes.

Where to Buy Insurance?

There are four choices for getting coverage, and three involve buying policies. The fourth is the self-insured individual corporation.

  • 1

    The Open Market

    The open market is the best place to buy workers comp insurance. You can use a licensed agent or broker to survey the market and find quotes that offer excellent coverage and low prices.

  • 2

    Self-Insurance

    By statute, all self-insured companies must join the North Carolina Self-Insurance Association, and secure their liability through the guarantees provided by security deposits, excess liability insurance, and the state self-insurance fund.

  • 3

    Self-insurance Funds

    The government must approve funds that provide group self-insurance. By statute, all self-insured group funds must join the North Carolina Self-Insurance Association. The law defines these funds as an Association Aggregate Security System and requires approval from the Commissioner of Insurance. The state secures their obligations through enforcement and the Self-Insurance Fund

    Small and medium employers can join self-insurance funds. These groups of similarly sized companies in related fields can offer affordable rates and favorable terms to qualified applicants. You must show the ability to contribute to cover the group’s liability and to accept joint liability for any shortfall.

  • 4

    Assigned Risk Pool

    The North Carolina Workers’ compensation Insurance Plan (NCWCIP) is the formal system for residual market coverage. The NCWCIP or state assigned risk pool accepts firms that cannot qualify for commercial insurance coverage on the open market. The North Carolina Rate Bureau administers the assigned risk pool. Companies must access applications through licensed agents that certify their situations as difficult to place. Insurance coverage through assigned risk carriers costs more than open market coverage, and there are fewer discounts.

How Much Does Workers’ comp Insurance Cost?

The costs of workers comp insurance depend on the rate assigned to the occupations that your business uses. The NCRB sets rates and job classifications. Once you establish the numbers of jobs in each class, the result is the base premium. Insurers can then consider the modified experience rating and raise or lower the rate depending on whether the rate is above or below 1.0.

What Is the Cost of Not Getting Workers’ Comp Insurance?

Uninsured employers face severe consequences in North Carolina including personal liability exposure for medical costs and disability payments to injured employees. Uninsured employers face the below-listed potential consequences.

  • Uninsured employers can get harsh financial penalties.
  • The state can charge willful violations and extremely negligent cases as misdemeanors.
  • The state can refer aggravated cases, and fatalities, for consideration as felony charges.
  • Uninsured employers involved in serious violations face the possibility of imprisonment.

Factors that Impact Coverage

  • Legal

    There are exceptions to the rule of three employees for workers’ comp coverage. When officers and shareholders in a corporation are not covered by workers’ comp, they may not be counted as part of the rule of three. You must have coverage if one or more employees must engage in activities that involve handling or using radiation.

  • Liability

    North Carolina has a complex rule of prime contractor liability for subcontractor employee coverage. The law does not hold the prime contractor liable if at any time prior to an injury the contractor conforms subcontractor coverage for employees, and if the prime was not aware of lapse or expiration.

  • Rates

    Employers can get additional discounts from insurers for safety programs. In group self-insurance, the rates setting factor is the modified experience rating of the group. Self-insured groups can apply their group Mod, and the entire group can benefit from lower rates.

Other Helpful Tips

You must use an agent to get access to insurance carriers through the NCWCIP. The initial qualification does not require declined applications, but it does require a determination by a licensed agent that the applicant is a difficult placement on the open market. This is another reason to consider using a licensed broker or agent to survey the open market.

Conclusion

North Carolina actively enforces its workers’ compensation requirements. There is some potential for confusion on defining active employee, verifying independent contractors, and clearing subcontractor liability. The search for North Carolina Workers’ Comp Insurance is a good time to use the expertise of brokers and agents. If in doubt about coverage and the rule of three, you should consult with experts including the state of North Carolina government.

Sources:

  • North Carolina Industrial Commission
    http://www.ic.nc.gov/employers.html

  • 2017 Report Workers’ compensation Insurance in North Carolina
    http://www.ncrb.org/Portals/0/ncrb/workers%20comp%20services/publications/State%20of%20NC%20WC%20Rpt%20%2006%2019%202017%20FINAL.pdf