Got Insurance? What You Need to Know if You Are An Uninsured Employer in New Jersey
Under New Jersey law, every corporation, limited partnership, as well as any employer required by law to submit an annual report, must provide valid proof of workers’ compensation coverage as part of its annual report. There are two ways that an employer can demonstrate valid proof of workers’ compensation coverage. An employer can either show proof of having coverage with an insurance carrier or by being self-insured. A self-insured employer must provide documentation by way of a current order from the Commissioner of Banking and Insurance exhibiting that the employer is self-insured. Alternatively, an employer who has coverage with an insurance carrier must provide a letter from that carrier or verification providing: (1) the name of the carrier; (2) the insurance policy number; and (3) the date of commencement of coverage under the policy.
There are instances when an employer, who is not self-insured, may fail to secure the requisite workers’ compensation insurance coverage. This failure can sometimes be the result of a simple mistake on the employer’s end. Other times, it could just be the result of an employer’s willful disregard or ignorance of the law. Either way, in New Jersey, such a failure could result in penalties for that employer. These penalties can include criminal sanctions and fines. For instance, an employer may still be found guilty of a disorderly persons offense for not securing workers’ compensation coverage if it is determined that the employer’s actions were not willful. Additionally, an employer can also be found guilty of a crime of the fourth degree if it is determined that said employer willfully failed to provide workers’ compensation insurance to its employees. In either scenario, the Director of the Division of Workers’ Compensation has the power to impose fines against that employer and can also be imposed by any officer or employee of the Division designated by the Director. These fines can range anywhere from $1,000.00 to $5,000.00.
It is important to note that an employer’s failure to secure workers’ compensation insurance coverage does not bar an injured worker from filing a claim with the New Jersey Division of Workers’ Compensation. The New Jersey Uninsured Employers Fund (the Fund) was created to assist in the payment of awards in cases where uninsured defaulting employers fail to provide workers’ compensation coverage for their employees. To get the Fund involved in a claim, the attorney for the injured claimant must first obtain proof, by way of a New Jersey Compensation Rating and Inspection Bureau search, to confirm that an employer is, in fact, uninsured. Thereafter, a motion must be filed by the claimant’s attorney to join the Fund. The Fund is only responsible for paying medical and temporary disability benefits. It is not responsible for making any payments for permanent disability. Furthermore, the Fund typically takes a very hardline position and will only pay medical and temporary disability benefits if an employer cannot be located.
When uninsured employers have an injured worker, the results are not ideal for either the employer or the injured employee. The employer can routinely be on the line for thousands to hundreds of thousands of out of pocket costs towards providing the injured worker with benefits, as there is no cap on the employer’s financial responsibility. Such benefits may include temporary disability benefits, payable at 70 percent of the injured worker’s average weekly wage, the cost of medical treatment and any permanent disability benefits that may be awarded to the injured worker. The right (or wrong) accident is enough to bankrupt most employers and may even result in millions of dollars in benefits over the lifetime of the claimant. As such, it is crucial that an employer not only secure workers’ compensation insurance but also regularly monitor the status of that coverage as well.In the long run, doing so will help avoid costly fees and prevent the imposition of possible sanctions.