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Existence of Coverage (C01)

Actual coverage of an IE is a threshold requirement for establishing the liability of an IC. APD 022268-s; TLC Section 401.011(44) lists three methods to provide workers' compensation insurance coverage:

  1. purchasing an insurance policy;
  2. providing certified self-insurance or group self-insurance; or
  3. coverage provided by a governmental entity.

See also TLC Section 406.003.

Under Chapter 91 of the Labor Code, either a professional employer organization (PEO) or its client may provide workers’ compensation insurance coverage for all covered employees. A certificate of insurance coverage or other evidence of coverage showing that either a PEO or a client maintains workers' compensation insurance coverage constitutes proof of workers' compensation insurance coverage for the PEO and the client with respect to all covered employees of the PEO and the client. TLC Section 91.006.

Except for public employers and as otherwise provided by law, it is optional for an employer to provide workers' compensation insurance coverage. TLC Section 406.002(a). If an employer elects to provide workers' compensation coverage, recovery of workers' compensation benefits is the exclusive remedy of an IE or their legal beneficiary or beneficiaries against the employer for the death of or a work-related injury the IE sustains. TLC Section 408.001(a). However, exemplary damages by the surviving spouse or heirs of the deceased employee, whose death was caused by an intentional act or omission of the employer or by the employer's gross negligence, are not prohibited. TLC Section 408.001(b).

An IC cannot waive into coverage where none existed by failing to observe the timely defense provisions of TLC Section 409.021. APD 022268-s, citing Houston General Insurance Co. v. Association Casualty Insurance Co., 977 S.W.2d 634 (Tex. App.-Tyler 1998, no writ).

Cancellation or Non-Renewal of Coverage by the IC.

An IC that cancels or does not renew a workers' compensation insurance policy by its anniversary date must deliver notice of the cancellation or non-renewal by certified mail, in person, or by electronic means in accordance with Chapter 35, Insurance Code to the employer and DWC not later than the 30th day before the date on which the cancellation or non-renewal takes effect. However, under TLC Section 406.008(a)(2), notice is required not later than the 10th day before the date on which the cancellation or non-renewal takes effect if the cancellation or non-renewal is because of the following:

(A) fraud in obtaining coverage;

(B) misrepresentation of the amount of payroll for purposes of premium calculation;

(C) failure to pay a premium when due;

(D) an increase in the hazard for which an employer seeks coverage that results from an act or omission of the employer and that would produce an increase in the rate, including an increase because of a failure to comply with:

(i) reasonable recommendations for loss control; or

(ii) recommendations designed to reduce a hazard under the employer's control within a reasonable period; or

(E) a determination made by the commissioner of insurance that the continuation of the policy would place the insurer in violation of the law or would be hazardous to the interests of subscribers, creditors, or the general public.

The IC's failure to give notice as required results in an extension of the policy until the date on which the IC complies with the required notice. TLC Section 406.008 and 28 TAC Section 110.1. The IC has the burden of proof to show compliance with TLC Section 406.008(c). APD 981597.

IC Failed to Establish Cancellation or Non-Renewal.

At issue was whether the subclaimant/employer had workers' compensation insurance coverage with the IC on the date of injury. In evidence was an IC's Notice of Coverage/Cancellation/Non-Renewal of Coverage showing the effective dates of coverage and listing the type of transaction as "carrier 30 day cancellation/non-renewal." The date the IC notified the employer of cancellation was left blank in the notice. The subclaimant/employer denied receipt and no evidence to the contrary was presented. The ALJ determined that the IC did not provide workers' compensation coverage for the subclaimant/employer. The ALJ's determination was reversed and a new decision rendered that, because the IC failed to establish that it gave notice as required by TLC Section 406.008(a), the policy was extended pursuant to Section 406.008(c) and the employer did have workers' compensation coverage with the IC on the date of injury. There was no evidence that the IC gave notice of non-renewal of coverage by certified mail or in person (the only means of providing notice allowed under TLC Section 406.008(a) at the time of this case) to either the employer or DWC at any time, much less within the required timeframes in TLC Section 406.008. The AP held that the IC failed to comply with the requirements of TLC Section 406.008 and therefore as a matter of law failed to establish either cancellation or non-renewal of coverage. APD 050931.

Cancellation or Non-Renewal of Coverage by the Employer.

An employer who terminates workers' compensation insurance coverage is required to file a written notice with DWC not later than the 10th day after the date on which the employer notified the IC to terminate coverage. Termination of coverage takes effect the later of the 30th day after the date of filing of notice with DWC or the cancellation date of the policy. The coverage shall be extended until the date on which the termination of coverage takes effect, and the employer is obligated for premiums due for that period. TLC Section 406.007.

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