How Texas’s Nonsubscriber Workers’ Compensation System Affects Small Contractors in Dallas 

Texas allows many private employers to opt out of the traditional workers’ compensation system. A contractor who opts out, known as a nonsubscriber, forfeits the liability protections associated with standard workers’ compensation coverage. That exposure can be financially devastating for a small operation.

 

What Nonsubscribers Face

When a contractor skips workers’ comp coverage, injured workers can file civil suits and pursue damages in court rather than going through an administrative claims process. Legal fees, potential jury verdicts and business interruption costs could all fall directly on the contractor.

 

For small contractors, the practical risks may include:

• Out-of-pocket medical costs for injured workers with no insurer sharing the burden
• Substantial damages arising from civil litigation
• Loss of contributory negligence, assumption-of-risk and fellow-servant defenses in court
• Difficulty qualifying for larger commercial projects that require proof of workers’ compensation coverage
• Ineligibility for many public sector and government projects

 

Coverage Options Worth Exploring

Nonsubscribers who want to manage their exposure have options. Occupational accident insurance, for example, may provide benefits for medical expenses, disability or accidental death, depending on the policy. However, occupational accident insurance is not a substitute for workers’ compensation insurance and does not provide the same statutory protections.

 

Because coverage varies significantly among nonsubscriber programs and insurance policies, contractors should work with an insurance professional familiar with Texas nonsubscriber risks to determine how employee injury coverage fits alongside their general liability and other contractors insurance policies.

 

Make the Right Call for Your Business

The nonsubscriber path is a business decision, not a simple cost-cutting move, and the potential consequences can outweigh any premium savings. Small contractors in Dallas, TX and surrounding communities should weigh this carefully before opting out of or staying outside the traditional system.

 

Contact JES Tax and Insurance to review your current workers’ compensation strategy and explore coverage options that match the size and risk profile of your contracting business.

 

 

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.