In the continuing series, The Arizona Business Insurance Guide, I'll do my best to cover the most common questions about Workers' Compensation in Arizona. I wrote a post a few months ago about the basics of Work Comp in Arizona, but there's much more to know if you are a business owner in Chandler, Gilbert, Phoenix, Scottsdale or Tucson, Arizona.

​The format will be question and answer.

Let's jump right in.

​(Oh, first, the standard disclaimer: I'm an insurance agent. I can be reached at 480-940-0909. I'm not a lawyer. You should not make decisions on this information without consulting an insurance agent and your attorney. Coverage cannot be bound based on this article. ~Joe)

Workers' compensation, also known as "workmans' comp" and  "work comp" is a type of insurance that pays for medical expenses, lost wages and disability for work-related illnesses and injuries.

​Premiums are paid by the employer. Workers' Compensation was created in part to ensure that employees got immediate financial help if they were hurt on the job, and employers had some protection from lawsuits due to work-related injuries.

Workers' compensation in Arizona is regulated by the Industrial Commission of Arizona.

If you have employees...

​Yes, you are required to carry workers' compensation, even if you have only one employee.

(This is authorized by Arizona Statute A.R.S. § 23-901. Scroll down to Chapter 6 to see all the sections. And if you really like detail, you can read the 101 pages of Arizona Workers' Compensation Administrative Code. Have a lot of coffee ready.)
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In short- the Arizona Legislature has required this coverage, even for one employee.

Yes, there are exceptions, but very few. 

In Arizona, you are not required to carry workers' compensation on yourself if you are a sole proprietor without employees.

​You are also not required to provide workers' compensation in Arizona for working partners, very infrequent workers ("both casual and not in the usual business of the employer"), domestic servants, and independent contractors. But see the question below where I discuss the risk of assuming someone is an independent contractor. 

You are not required to carry work comp on yourself. But you may. It's optional in Arizona

Arizona workers' compensation law allows for self insurance. The Industrial Commission of Arizona sets the rules for this. Your business must have been in existence at least five years, have an annual payroll of two million dollars, and have assets of at least 50 million dollars. This rules out most small businesses in Arizona. There is more information here.    

You still have to provide workers' compensation insurance in Arizona even if your employees are part-time, seasonal or minors... even family. Yes, you have to cover your brother Bob.

Any and all employees, regardless of status, must be covered by work comp in Arizona.

One of the most common ways to get around work comp requirements is by using only independent contractors. If you use an independent contractor once in a while, and you are careful to not exercise  control over their activities, you might be ok without work comp.

BUT BE CAREFUL. I wrote an article about the definition of independent contractor, and many business owners think that they're safe by calling a person an "independent contractor."

​However, calling someone an independent contractor does not necessarily make them one. 

In disputes after someone gets hurt on the job, the courts decide if that person you have doing things for you is an employee or not. They base it on a "totality of facts." If the court decides that the injured "independent contractor" is an employee- you could be in trouble.

​In short: if it looks like an employee, it probably is.

Yes, Arizona operates under a "no fault" system.

What does that mean?

No matter who or what causes the illness or injury at work, workers' compensation pays.

​It doesn't matter if the employer left a banana peel on the floor, or if the employee was just careless when he dropped the hammer on his foot. Work comp handles the claim.

​Of course they are a few exceptions (consult an attorney for details). One of the most common exceptions is in cases of "purposely self-inflicted" injury.

As an employer, you need to consider what could happen if you don't carry workers' compensation on your employees in Arizona.

This may scare you (it should)... you would be guilty of a Class 6 felony. (A.R.S. § 23-932)

​Are you going to jail? Probably not. Are you in trouble? Yes.

​In addition to your employee being able to sue you in some cases (this gets into legal weeds, so consult an attorney for the details), you are also subject to a civil fine of $1,000 for the first offense, $5,000 for the second offense, and a $10,000 fine for the third offense.

If an employee is injured, they would still be covered- just not by your workers' compensation. Instead, they'd be covered by the Industrial Commission of Arizona (ICA). The ICA has a special fund to process work-related illness or injury claims when the employer has no workers' compensation coverage.

Then the ICA comes after the employer for reimbursement.

Finally, and this is a big thing... the State of Arizona could shut down your business with a court injunction if you refuse to get the required workers' compensation insurance.

​It's just not worth the risk.

In addition to being required to provide workers' compensation for your employees, you have several other obligations. They are important, and not complying can get costly.
​

1. You must publicly post employee rights.
   You must post, in writing and in a public place, the rights of an employee to accept or reject workers' compensation coverage. The form is here.
   
   
2. You must not demand that an employee waive coverage.
   Even though an employee may voluntarily waive their right to participate in workers' compensation, do cannot ask or pressure them to waive that right.
   
   
3. You must provide an employee with certain information in the event of an incident.
   If an employee is injured on the job, or if they report to you that they have an illness or injury related to the job, you must provide them immediately with the name of your workers' compensation carrier, the policy number, and the policy expiration date.
   
   
4. You must report a work-related illness or injury within 10 days.
   The Industrial Commission of Arizona requires that you report the disease, illness or injury to your workers' compensation carrier and to the ICA within 10 days. You can download the form here, or in fillable pdf format here.
   
   
5. You must report certain injuries more quickly.
   The Arizona Division of Occupational Safety and Health (ADOSH) has additional reporting requirements. Here they are:
   -Work related fatalities, report within 8 hours.
   -In-patient hospitalizations, amputations and any eye losses, report within 24 hours.
   Visit their page for details on reporting, or call (855) 268-5251.
   
   
6. You must never punish an employee for a claim or lawsuit.
   If there is a claim for a work-related injury or illness, be careful to not do anything that can be seen as punishment or a reprisal. Watch your words and actions.
   
   
7. You must cooperate with investigators.
   If one of your workers files a work comp claim or a lawsuit against you for a work-related illness or injury, cooperate with all investigators. Don't withhold any information, and most importantly, contact your attorney and your insurance agent.

These aren't just good ideas. They are business-saving obligations. There are many attorneys in Arizona ready and willing to come after you if you don't do what's required.

No, not usually.

​According to the Industrial Commission of Arizona (ICA),

​"in most instances, workers compensation is the exclusive remedy against an employer that is insured for workers’ compensation."

But that doesn't mean you are always in the clear after a work-related claim.

In the case of an employee who has voluntarily opted-out of workers' compensation, you could be sued for financial damages related to the illness or injury sustained at work. This is a good reason to discuss all possible scenarios with your attorney and your insurance agent.

Finally, if the employer has not followed the legal requirements for posting employee rights to accept or reject work comp coverage, or if the employer or another employee has engaged in "willful misconduct" then the employee may be able to file a lawsuit.

The Industrial Commission of Arizona provides a list of all insurance carriers that are licensed to sell work comp in Arizona. That list is here. In addition, if your business does not qualify for a commercial workers' compensation policy, you can sometimes get coverage through the former "state plan" that now competes as a non-profit company, CopperPoint Mutual.

If all else fails, the NCCI (National Council on Compensation Insurance) administers an "Assigned Risk Plan" for the State of Arizona for those employers that cannot otherwise qualify for work comp coverage through any other carrier.

YOUR FIRST OPTION should be to work with an experienced and local insurance agent who has knowledge of the ins and outs of workers compensation in Arizona.

You should choose a local, experienced insurance agent for two reasons:

• Safety
• Simplicity

SAFETY
An experienced local insurance agent can take the time to make sure that every "i" is dotted and every "t" is crossed. You can't afford to miss anything. Workers' compensation insurance isn't just an afterthought- it's essential to the survival of your business. A local agent sits down with you to make sure that you do this right.

SIMPLICITY
A local insurance agent partners with a company that they've chosen to provide complete workers' compensation protection, including a dedicated team of specialists to hold your hand through any claims that arise. You need simple if something happens.

​MOST IMPORTANTLY, you have ONE PERSON TO CALL for any questions. Your local agent partners with you so you don't have to be the expert. You've got a strategic partner.

Yes.

Any employer can get workers' compensation insurance in Arizona, and I'd be glad to help you find coverage, regardless of your business.

However, the company that I represent, Farmers Insurance, specializes in certain industries.

If your business fits one of these categories, call me before checking elsewhere. I've got the experience to help, and I can offer a very competitive quote.
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• Apartment Owners
• Auto Service and Repair
• Commercial Real Estate
• Home and Building Service
• Hospitality
• Manufacturing
• Professional Service
• Religious Organization
• Restaurant
• Retail
• Wholesale

There are roughly 38 million home based businesses in America. In Arizona, we have our share of the strong and growing home-based business economy.

In fact, Arizona was recently rated as the 6th best place in the country to do business.

Here in Maricopa County, we have thousands upon thousands of home-based businesses, and I insure many of them in Chandler, Gilbert, Phoenix, Tucson and the rest of the Valley.

Success is hard-earned. Home based business owners jump through hoops and rules and regulations (take for example the City of Tucson's home-based business ordinances) to  get started. Then there are the financial difficulties to getting up and running. It's tough.

But the majority of home-based businesses are still growing strong after three years.

Congratulations if you are one of them!

However, in spite of this good news, I see one very important area that is often neglected, and it can close your business down.

If you are a home-based business here in Arizona, you might be thinking:

Let me correct that myth, and maybe save your business from a catastrophe.

There is limited coverage for your business if you operate from your home. Very limited. 

For instance, if you have equipment that is owned or used by your business, like computers, printers, filing cabinets, desks, chairs, backup hard drives and other equipment- your homeowners policy, if it covers it at all (not a guarantee), limits the coverage to usually $2500 on premises, and $500 off-premises.

And that's just equipment and tangible property.

What happens if one of your customers visits you at home, and burns herself on the coffee you just made to be nice? Or what about the delivery person tripping on your steps as he delivers your business package to your home office?

Are you covered then?

​It's very possible that you aren't.

Finally, you may still be exposed to liability (think expensive lawyers suing you!) for all kinds of things that your homeowners policy was never designed to protect:

• Defective products or services.
• Late (or no) delivery of promised services or products.
• Slander, libel or defamation (fancy legal terms for saying bad things about someone).
• Physical injury caused by your product or service.

​
Most small and just starting out home-based businesses in Arizona are too busy to think about all these depressing possibilities. You're just trying to keep growing.

​I understand that. 

I could make this complicated, but your life is probably complicated enough.

So let's make it simple, and thanks to a great article about insuring your home based business over at the Insurance Information Institute, we can keep the discussion simple.

There are normally three ways to insure your home based business in Arizona:

1. Homeowners Policy Endorsement
   Sometimes, making sure the gaps are covered is as simple as a very inexpensive endorsement to your existing homeowners policy. You might be surprised at low cost this type of home-based business coverage costs in Arizona. Of course, it only works for certain businesses, so make sure you check with your agent.
   
   
2. In-Home Business Policy
   Some companies offer very customized policies called in home business polices. These are essentially an in-between solution, offering more protection than a normal endorsement to a homeowners policy, but not quite all the coverage of a true Business Owners Policy. As endorsements get better, and Business Owners Policies get more affordable, these are not used as often.
   
   
3. Business Owners Policy
   Even though your are "small" and operate out of your home or garage, a Business Owners Policy (also known as a 'BOP') may be exactly what you need. These "workhorses" of the small business insurance world are simple, affordable, and comprehensive. A BOP is customized to cover your business property, your inventory, your liability risks and other exposures. Of course, each business is unique, so your agent will need to tailor the policy to your exact needs.
   

Going to see your insurance agent isn't on the top of your fun list. I get it.

But it doesn't have to be on your "avoid at all costs" list either.

You don't need to get all your stuff together like you are being audited. And it's not scary like going in for a root canal. 

If your local insurance agent in Arizona is experienced working with home-based businesses, she or he can make this painless. Almost fun. No, really. I'm not kidding.

So call your agent today. If you need an experienced agent who knows the ins and outs of small business and home-based business insurance, I'd be honored to help. You can call me, Joe Baselice, at (480) 940-0909.

I might ask you a few questions like:

• What is the nature of your business? (Pretend you are selling me your service.)
• Are you the owner or is it someone else?
• Do you have any employees? Do they work out of your home also?
• How many customers visit your home? How often?
• Do you  provide home care services? Daycare?
• Are there business signs displayed?
• Are there any unusual risks?

See? Not too hard.

We can chat about how you started and what your dreams and goals are. And I can help craft a custom policy that meets your needs for an affordable price.

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photo by alan levine on flickr, cc licensed