Who Must Carry Insurance?Workers' Compensation Coverage Requirements for Tennessee Businesses
The Tennessee Workers’ Compensation Law requires certain employers to provide workers’ compensation insurance benefits. Two equally important objectives are reached when this occurs.
- First, a worker suffering an on-the-job injury or illness will be better able to receive the medical treatment and wage replacement benefits they are entitled to under the law.
- Secondly, fairness in competition is achieved. It is not fair for responsible Tennessee employers to be in competition with non-compliant employers. Those unfair employers undercut responsible employers by not having to bear the expense of providing workers’ compensation insurance.
It is illegal for an employer to require an employee to pay any portion of the business’ workers’ compensation premiums.
Employer Coverage Requirements
- All employers in the construction business or trades (construction service providers) that have one or more employees (unless they are specifically exempted).
- Effective March 1, 2011, owners of construction businesses are also required to carry workers’ compensation coverage on themselves or be listed on the Exemption Registry.
- Employers in the coal mining industry must secure coverage if they have one employee.
- Every other employer in the state of Tennessee that has five or more employees must secure workers’ compensation insurance coverage for their employees either by purchasing a policy from an insurance carrier or by qualifying as a self-insured employer with the Department of Commerce and Insurance.
- If an employer cannot find an insurance company to write a workers' compensation policy, it should access NCCI or contact NCCI's Customer Service Center at 800-NCCI-123 (800-622-4123).
- Family members, part-time employees, and corporate officers are included when determining the number of employees if they meet the definition of employee.
How to Obtain Workers’ Compensation Insurance
There are multiple ways Tennessee employers may obtain workers' compensation coverage. They include:
- From an insurance agent who can write a workers’ compensation policy from one of some 400 insurance companies that have been licensed by the Department of Commerce and Insurance to sell insurance in this state.
- From the Assigned Risk Plan if you have been refused a policy by two or more non-affiliated insurance companies licensed and actively writing policies in Tennessee. There are currently 10 companies writing policies in the Plan. Employers that have any other form of commercial insurance, such as commercial automobile or general liability, and have been refused a policy should consider contacting the insurance agent that sold them those lines of coverage to see if they can place them with an insurance company that they represent that is participating in the Plan.
- Through a group self-insurance pool or trust approved by the Department of Commerce and Insurance.
- Through an individual self-insurance application approved by the Department of Commerce and Insurance.
Designated Insurance Rate Service Organization
The Bureau’s General Rules require adjusting entities (insurance carriers, TPAs and self-insured employers) to notify the Bureau’s designated Rate Service Organization within thirty (30) calendar days of the procurement or renewal of workers’ compensation insurance. The National Council on Compensation Insurance (NCCI) is the designated organization for these purposes. The Bureau also utilizes NCCI for the determination of job classifications for all Bureau rules.
Election of Coverage
Employers, not required to have workers’ compensation insurance, that desire to purchase a policy anyway should file the Exempt Employers Notice of Acceptance of the Workers' Compensation Act of Tennessee (Form I-8) with the Bureau. If that employer later decides to drop its workers' compensation coverage, it must file the Exempt Employers Withdrawal of Notice of Acceptance (Form I-9) with the Bureau. If an employer files a Form I-8, it will remain subject to the workers' compensation requirements until a Form I-9 is received and accepted by this Bureau. If the employer drops its coverage and does not file the Form I-9 and an injury occurs, the employer could be held responsible for providing benefits to the injured employee in that claim.
If an employer, not in the construction or the coal mining industry, has five or more employees and its workforce drops below five, the employer may elect to drop its workers' compensation coverage. To drop the coverage, the employer must file a Notice of Withdrawal from Coverage of the Tennessee Workers' Compensation Law (Form I-3) with the Bureau. The employer will be exempt from the coverage requirements and will not be required to provide workers' compensation coverage while its workforce remains below five employees only after the form has been accepted by the Bureau.
Corporate officers in non-construction type employments, may exclude themselves from being covered by their workers’ compensation insurance by filing a Corporate Officer Election Not to Accept Provisions of Workers' Compensation (Form I-6) with the Corporation and must include an affidavit that the officer rejecting the coverage was not advised, counseled or encouraged by the employer or anyone acting on behalf of the employer to waive their rights. The Corporate officer should provide a copy of the exclusion to the agent and carrier for audit purposes. The Form I-6 can be withdrawn by filing a Notice of Corporate Officer’s Revocation of Exemption (Form I-7). While corporate officers are afforded the right to exempt themselves from a workers’ compensation policy, they are NOT excluded from the count of employees unless they are not paid or compensated.
Most subcontractors and independent contractors are sole proprietors or partners. Sole proprietors and partners are usually not covered by their workers' compensation policy when it is written; only the employees are covered, unless the contractor is considered to be a Construction Services Provider. The Independent contractor that is a sole proprietor or partner may elect to be covered by his/her own workers' compensation policy by filing an Election of Sole Proprietor or Partner to Come Within the Provisions of the Tennessee Workers’ Compensation Law (Form I-4) with the Insurer or in the case where the entity is self insured, should file the election with the entity. Sole Proprietors, Partners, and Members of LLCs involved in providing construction services are covered by their workers’ compensation policy (unless they are on the Secretary of State’s exemption registry) and do not need to file Form I-4. The Form I-4 can be withdrawn by filing a Notice of Withdrawal of Sole Proprietor or Partner Election (Form I-5).
A subcontractor must provide coverage for his employees. Subcontractors, with the agreement of the general contractor, can elect to be covered by the general contractor's workers' compensation insurance by filing an Agreement of General Contractor to Provide Workers’ Compensation Coverage to Subcontractor (Form I-15) or a subcontractor can have his own workers' compensation coverage and furnish proof of this coverage to the general contractor. The subcontractor, acting as a self-employed individual, is not an employee of the general contractor and has no coverage as long as he/she is not working as an employee. The Form I-15 allows the general contractor to withhold premiums from the subcontractor's payroll to cover the subcontractor and its employees. Failure of the general contractor to file the form with the Department of Labor and Workforce Development does not relieve the obligation of the insurance company to provide coverage to a subcontractor when the subcontractor can produce evidence of payment of premiums to the insurance company. There is no form that will waive the rights of employees of subcontractors.
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