1000 Questions

Frequently Asked Questions About Non-Subscription and ERISA

© 2013 by Paul M. Hood Paul M. Hood, P.C.

1717 Main Street, Suite 5500, L.B. 49 Dallas, Texas 75201

(214) 373-3214 (214) 373-0843 (fax)

[email protected] www.pmhlaw.com

© 2013 by Paul M. Hood, P.C. Page ii

I N D E X 1. Who Is AIS? ....................................................................................... 1

2. What Is Occupational Accident Coverage? ...................................... 2

3. What’s the Market Like? .................................................................... 3

4. Who Are Some Well Known Non-subscribers? ................................. 4

5. How Does AIS Fit Into All This? ......................................................... 5

6. Who Administers the Claims? ............................................................. 6

7. What Does the AIS Program Look Like? ............................................ 7

8. Do I Have To Have Workers’ Compensation Insurance? .................. 8

9. What Is “Non-subscription” Anyway? .................................................. 9

10. What Are the Advantages of Opting Out? ......................................... 10

11. What Are the Disadvantages of Opting Out? .................................... 11

Table 1: Top Five Reasons Why Non-subscribing Employers Did

Not Purchase WC Coverage (as of 2012) ................................................. 12

© 2013 by Paul M. Hood, P.C. Page iii

Table 2: Top Five Reasons Why Subscribing Employers Purchased

Workers’ Compensation Coverage (as of 2012) ........................................ 13

12. Shouldn’t Everyone Opt Out? ........................................................... 14

13. Who Is Opting Out? .......................................................................... 15

Table 3: Percentage of Texas Employers That Are Non-subscribers

by Industry (2012 estimates) ...................................................................... 16


and Percentage of Texas Employees That Are Employed by Non-

subscribers (1993-2012) ............................................................................ 17

Table 5: Percentage of Texas Employers that Are Non-subscribers

by Employment Size (1995-2012) ............................................................. 18

14. What About Workers’ Comp Reform? ............................................... 19

15. What Does Everyone Think About the Reform? ............................... 20

16. What Do I Have to Do to Opt Out? ................................................... 21

17. What If I Don’t File My Form-005 or Post My Notices? ..................... 22

18. What Is ERISA? ............................................................................... 23

© 2013 by Paul M. Hood, P.C. Page iv

18. What Does (and Doesn’t) ERISA Cover? ........................................ 24

19. Do I Need an ERISA Plan If I Opt Out? ........................................... 25

20. What Documents Do I Need to Comply With ERISA? ..................... 26

21. What Does a Summary Plan Description Require? ......................... 27

22. What If I Sell the Company? ............................................................ 28

23. What About Negligence Lawsuits? .................................................. 29

24. Why Would Someone Sue Their Employer? ................................... 30

25. How Can I Avoid a Lawsuit? ............................................................ 31

26. Do I Really Lose All My Defenses? .................................................. 32

27. How Can I Tell When a Claim Is Suspicious? .................................. 33

28. How Does ERISA Affect a Negligence Lawsuit? ............................. 34

29. How Does ADR Work? .................................................................... 35

30. What Is Mediation? .......................................................................... 36

31. What Is Arbitration? ......................................................................... 37

© 2013 by Paul M. Hood, P.C. Page v

32. What Should a Good Non-subscriber Program Contain? ................ 38

AIS Contact Information ............................................................................. 39

© 2013 by Paul M. Hood, P.C. Page 1

Q: Who Is AIS? A: Accident Insurance Services, Inc.

• Since 1988, AIS has been a network of resources & solutions to general agents and agents in the occupational accident insurance industry throughout the State of Texas.

• AIS provides non-subscription field support, training and free

CE courses for thousands of agents.

• AIS is a specialist in occupational accident coverage. We provide policies with and without employer’s liability, TPA services, safety for employers & niche accident products.

• Michael L. Davis, Founder, President • Robert J. Rogers, CLU, ChFC, Executive Vice President &

Chief Marketing Officer, A National Faculty Member for The National Alliance of Insurance Education & Research.

• Beckie Ervin, CIC, Vice President, Underwriting • Texas Insurance Corporation with L&H, P&C, Surplus Lines

and MGA licenses


Q: What Is Occupational Accident Coverage? A: Occupational accident coverage is an affordable alternative to

statutory WC in Texas

• Non-subscription in Texas has been authorized since 1913

• Section 406.002 of the Texas Labor Code

• Premiums and claims costs significantly lower than

traditional WC policies

Policy has three components that provide most of the benefits associated with WC without the unlimited and open-ended liabilities

• Medical coverage subject to deductibles, limits and medical management

• Short term disability with a limited term of weeks

• AD&D coverage with limits of $150,000 in death

benefits


Q: What’s the Market Like? A: A Texas Sized Market

• As of 2012, 33% of all Texas employers were non-subscribers, covering approximately 1.7 million non-public employees.

• Approximately 113,000 businesses in Texas are non-

subscribers, many of them with 500 or more employees.

• Occupational accident coverage generates $200 MILLION in annual premium in Texas

A Well Established Market

• Mature and robust market -- product has been available for

more than 20 years

• Documented historical results and trends

• Very profitable line of business if properly administered


Q: Who Are Some Well Known Non-subscribers? A: These and many more …

• Wal-Mart Stores, Inc.

• Costco Wholesale Corp.

• Brinker International (Chili’s, Romano’s, Macaroni Grill)

• Best Buy Co., Inc.

• Randalls Food Markets & Tom Thumb Food & Drug

• Pappas Restaurants, Inc.

• James Avery Jewelers

• Nordstrom, Inc.

• Labatt Food Service, L.P.

• JC Penney Company Inc.

• Whole Foods Market

• Home Depot, Inc.

• Baylor Healthcare Systems

• Pilgrims Pride Corp.

• Just Brakes

• Inter Continental Hotels Corp.

• Golden Corral

• UT Southwestern Hospital

• Omni Hotels

• Methodist Hospitals of Dallas

• Hilton Worldwide, Inc.

• JB Hunt Transport Inc.

• Kroger Texas, LP

• Dairy Queen

• Tyson Foods, Inc.

• Taco Bell

• Memorial Hermann Healthcare Systems

• Touchstone Bernays

• Whole Foods Market, Inc.

• Sysco Corporation

• Sonic Drive-In

• H-E-B Grocery (300 store grocery chain)


Q: How Does AIS Fit Into All This? A: AIS is THE premier marketing and distribution company for

occupational accident insurance statewide

• Staff offers more than 100 years of combined experience in Texas occupational accident coverage

• Experience recruiting and training agents for product

distribution

• Manage claims, collect premiums and pay commissions to a network of over 1,000 agents across the state


Q: Who Administers the Claims? A: Caprock Claims Management LLC in Dallas, Texas

• Specific expertise in management of occupational accident programs (not a converted or diverted WC administrator)

• Staff exclusively dedicated to servicing this program for AIS

• Provides billing, claims administration, and customer service

functionality

• Common ownership with AIS creates single focus


Q: What Does the AIS Program Look Like? A: Flexible Coverage Options

• Single benefit plans Separate deductibles and coverage limits for wage loss and medical expense

• Combined benefit plans Aggregate deductibles and coverage limits for wage loss and medical expenses

• Available benefit periods of one, two or three years with varying deductibles

Maximum payable under policies ranges from low of $50,000 to maximum of $6,000,000

• Variety of industries • Large and small employers

• Scattered widely throughout the state geographically

• Established line of coverage and book of business

• Proven marketing organization

• Quality program administrator

• Recognized, respected carrier (“A” rating provides opportunity

to quote 50% more accounts – including the big ones)


Q: Don’t I Have To Have Workers’ Compensation Insurance? A: No. Employers in Texas have always had the choice of “opting

out” of workers comp. In fact, an employer can reject workers’

compensation completely and “go bare,” paying no benefits

whatsoever to injured employees. However, we do not recommend

this path, and believe that non-subscription should be a responsible

alternative, in which employers are encouraged to manage their costs

and provide a safer workplace.


Q: What Is “Non-subscription” Anyway? A: Texas (and now Oklahoma) are currently the only states that

allow private-sector employers the option of becoming “non-

subscribers” to the state WC system. The underlying premise of non-

subscription is that an employer can (and typically will) take better

care of its injured workers than a government bureaucracy. Elements

of non-subscription include:

• Administration

Nonsubscriber establishes its own rules for benefits and liability claim handling

Self-administered by employer or TPA Employer is directly involved in activities related to the

incident investigation, benefit payment, choice of medical provider, and return-to-work plan

• Benefits designed at the employer’s discretion, such as:

Wage replacements for lost time Wage supplements for a reduction in earnings Medical Coverage Payments for death or dismemberment Payments for other permanent bodily impairment

In workers’ comp, the employer’s responsibilities are delegated to the

employee’s medical provider (who may not be a licensed physician),

employer’s physician (in the event of a dispute), a claims adjuster, the

employee, and finally the employer. The process is heavily stacked

in favor of the employee and employee’s physician.


Q: What Are the Advantages of Opting Out?

A: In general, employers who “opt out” of workers compensation are:

• Better able to direct the care of injured employees

• Given a financial incentive to provide a safer workplace

• Can avoid the frustration of dealing with uncaring or unresponsive state agencies or health care providers.

Non-subscriber employers can participate in the decision to send an

employee to a certain doctor, whether to pay a claim, whether an

employee is eligible for benefits, whether light duty work is available,

and even whether a claim is valid at all.

Non-subscriber employers can also receive a direct return on their

effort to increase workplace safety, both in reduced premiums and a

reduction in claims.

Employee morale may also improve when hard working employees

see that “malingerers” are not permitted to take advantage of the

system and collect on suspicious injuries.


Q: What Are the Disadvantages of Opting Out?

A: Although employee lawsuits are rare, the biggest drawback to

non-subscription is the risk of a negligence claim by an employee.

Under workers’ compensation, the benefits are the employee’s

“exclusive remedy” in most cases. However, an employee can sue a

non-subscribing employer for his injuries, and there are certain

important defenses that are not available. Nevertheless, an employer

may still defend itself on several grounds, including the fact that the

employee was the sole cause of the injury, was intoxicated or

engaged in horseplay, or was not acting in the course and scope of

employment at the time of the accident. In addition, arbitration or

other alternative dispute resolution methods are available to non-

subscribers, and can help cut down on the risk of expensive litigation.

EXCEPTION TO EXCLUSIVE REMEDY: It’s important to remember

that even if an employer has workers’ compensation coverage, it can

still be sued for wrongful death or gross negligence, which may often

occur when there is a serious injury. Workers’ comp policies

generally do not provide coverage for this type of lawsuit – AIS does.


Table 1: Top Reasons Why Non-subscribing Employers Did Not Purchase WC Coverage (as of 2012)

Reasons given by employers

All non-

subscribing employers

Employers with more than 500

employees

WC premiums too high

15.0%

23.0%

Too few employees to justify WC

17.0%

N/A

Employers not required to have WC insurance by law

17.0%

14.0%

Medical costs in WC system were too high

10.0%

24.0%

Employer had few on-the-job injuries

17.0%

N/A

Employer felt the company could do a better job than the Texas Workers’ Compensation System at ensuring that employees receive appropriate benefits.

N/A

20.0%


Table 2: Top Reasons Why Subscribing Employers Purchased Workers’ Compensation Coverage (as of 2012)

Reasons given by employers

All WC-

subscribing employers

Employers with more than 500

employees

Employer thought having workers’ compensation was required by law

19.0%

17.0%

Employer was able to provide workers compensation through a health care network

20.0%

20.0%

Employer was concerned about lawsuits

21.0%

17.0%

Employer needed workers compensation to obtain government contracts

9.0%

11.0%

Workers comp insurance rates were lower

11.0%

N/A

Employer was able to reduce its workers’ compensation insurance costs through deductibles, certified self insurance, group self-insurance or other premium discounts

N/A

17.0%


Q: Shouldn’t Everyone Opt Out?

A: No – High risk industries may want to remain in the workers’

compensation system to avoid most lawsuits. The same is true for

employers with high rates of employee turnover and a history of

serious injuries. However, opting out may be a good decision for

companies with a low frequency of accidents (or even a fairly large

frequency of non-serious, “nuisance” accidents), a dedication to

workplace safety, and a desire to participate in the oversight of

employee injury claims.


Q: Who Is Opting Out? A: Approximately 1.7 million Texas employees worked for non-

subscribing employers in 2012. Interestingly, this represents a 2%

decrease since the last reporting period, in 2010. However,

according to the Texas Department of Insurance, industries with

higher non-subscription rates (such as Hotel and Food Services,

Professional Services, Health Care, Wholesale and Retail Trade, and

Transportation) may have been disproportionately affected by the

2008-2010 U.S. recession, and the temporary reduction in their

workforce. With the economy now on the rise again, these numbers

should rebound in the next 2 years.

Significantly, during the same period the percentage of Texas non-

subscriber employers increased slightly, from 32 percent in 2010 to

33 percent in 2012. Non-subscription percentage rates among large

employers rose from 15 percent in 2010 to 17 percent in 2012, while

some medium-sized employers (i.e., those with 50-99 employees)

also moderately increased their non-subscription percentage rates.

(See Table 5)



by Industry (2012 estimates)

Industry Type Non-subscription Rate (2008)

Non-subscription Rate (2010)

Non-subscription Rate (2012)

Agriculture / Forestry 27% 25% 29% Mining / Utilities / Construction 28% 19% 22% Manufacturing 31% 31% 29% Wholesale Trade / Retail Trade / Transportation

29% 32% 26%

Finance / Real Estate / Professional Services

33% 33% 32%

Health Care / Educational Services 39% 32% 35% Arts / Entertainment / Hotel / Food Services

46% 40% 40%

Other Services (Except Public Administration)

36% 42% 49%


Table 4: Percentage of Texas Employers That Are Non-subscribers and Percentage of Texas Employees That Are Employed by Non-subscribers (1993-2012)

051015202530354045

1993 1996 2004 2008 2012

EmployersEmployees


Table 5: Percentage of Texas Employers that Are Nonsubscribers by Employment Size (1995-2012)

Employment Size (# of employees)

1995 (%)

1996 (%)

2001 (%)

2004 (%)

2006 (%)

2008 (%)

2010 (%)

2012 (%)

1-4

55

44

47

46

43

40

41

41

5-9

37

39

29

37

36

31

30

29

10-49

28

28

19

25

26

23

20

19

50-99

24

23

16

20

19

18

16

19

100-499

20

17

13

16

17

16

13

12

500+

18

14

14

20

21

26

15

17


Q: What About Texas Workers’ Comp Reform? A: In 2005, the Texas Legislature passed HB 7, which was

supposed to completely reform the state’s workers’ compensation

system. One of the purposes of HB 7 was to reduce the cost of

workers compensation insurance and, according to the TDI, average

premiums have come down about 50% since 2003. However, an

average industry-wide rate increase of 1.3% has been requested for

2012, and it seems likely that additional increases will be necessary

to cover projected losses and expenses, and produce the targeted

profit.

In regard to expenses, total medical costs for professional services

evaluated at six months post-injury increased by 26% since 2007.

Similarly, total hospital costs increased during the years 2005 to

2008, and have been marginally increasing since then. The average

professional cost per workers comp claim also increased significantly

– by 31 percent – between years 2007 and 2011. According to the

TDI, one of the primary causes for these increases was the expanded

fees-for-services rate structure in the TDI’s own 2008 professional

service fee guidelines.


Q: What Does Everyone Think About the Reform?

A: Although employees were able to access medical care faster in

2012, they still reported lower satisfaction levels with the care they

received than when compared to 2005. Additionally, a higher

percentage (25 percent) of employees surveyed in 2012 reported that

the medical care they received for their work-related injury was worse

than their routine medical care.

The satisfaction of non-subscribers with their programs remains very

high in four different survey areas: overall satisfaction (69%), good

value for the company (58% satisfaction), the ability to manage costs

(54.3% satisfaction), and the adequacy of benefits paid to injured

workers (47% satisfaction).

Employer satisfaction levels also vary by employer size. Smaller

nonsubscribers (fewer than 50 employees) had 63% overall

satisfaction, while companies that were medium-sized (50-99

employees) and larger (100+ employees) had satisfaction rates of

83% and 76%, respectively.


Q: What Do I Have to Do to Opt Out?

A: Effective January 1, 2013, all nonsubscribers must file the DWC

Form-005 between February 1 and April 30 of each year, unless their

only employees are exempt from coverage under the Texas Workers’

Compensation Act. Employers can submit the DWC Form-005 to the

Workers’ Compensation Division of the TDI (formerly the TWCC) by:

• filing electronically on the TDI’s website;

• faxing the form to the TDI; or

• mailing the form to TDI’s address at the top of the form. Non-subscribers must also notify their employees of the decision to

“opt out” with the TDI’s prescribed poster (the “DWC Notice 5”), which

should be placed in at least one prominent area such as a break-

room wall or bulletin board. We also recommend that the company

obtain sufficient insurance coverage to protect it in the event of a

workplace injury claim. The notice should be in English, Spanish and

any other language common to the employer’s employee population.


Q: What if I Don’t File My Form-005 or Post My Notices?

A: Since 2007, the TDI has brought the following enforcement

actions – and sought administrative penalties – against

nonsubscribers for to failure to provide requested information about

their workers' compensation coverage status:

2013 - $11,850 in fines 9 enforcement actions

2012 - $42,050 in fines 32 enforcement actions

2011 - $0 in fines 0 enforcement actions




The sharp-eyed observer may see a trend here, although in the grand

scheme of things, this is still not particularly aggressive enforcement.

Nevertheless, the TDI appears to be getting more serious about the

notice and filing requirements for nonsubscribers – in 2012, one

unlucky employer received a $10,000 fine! The lesson of all this is

that you should file the required forms and post the required notices.


Q: What Is ERISA?

A: The Employee Retirement Income Security Act of 1974 (ERISA)

is a federal law that sets certain standards for welfare benefit plans in

private industry. ERISA does not require any employer to establish a

welfare benefit plan. It only requires that those who establish such

plans must meet certain minimum standards. Employers who opt out

of Workers’ Compensation and who create a workplace accident

program for their employees are covered by ERISA. By complying

with the legal requirements of ERISA, employers can drastically limit

their exposure to any claims relating to such plans, or to the

distribution of plan benefits.


Q: What Does (and Doesn’t) ERISA Cover? A: ERISA covers disability and accident plans, including workers’

compensation “opt-out” plans, which provide medical, accidental

death and dismemberment, and disability benefits under one plan.

The person or entity that decides how to distribute benefits is called

the “plan administrator.” ERISA applies to any benefits that are paid

or distributed to employees who are eligible to participate in such

plans, as defined by the plan documents. ERISA benefits include

wage replacement payments, medical treatment and hospital bills,

disability compensation, accidental death or dismemberment benefits,

or anything else paid under a workplace plan.

ERISA does NOT apply to state-law negligence claims.

Therefore, an employer should not be led to believe that a non-

ERISA workplace injury claim will automatically be sent to federal

court, or covered by ERISA.


Q: Do I Need an ERISA Plan If I Opt Out?

A: Yes – By having a written ERISA plan in place and giving a

summary plan description to employees, many of the employer’s

legal duties under ERISA are satisfied. These written plans let

everyone know what their responsibilities are, and allow the employer

to have a great deal of authority in managing the plan itself. If there

is no written plan, then ERISA may already have been violated, and

the employer may be subject to substantial penalties. In addition, the

absence of any plan makes the employer extremely vulnerable to

ERISA claims for breach of fiduciary duties, or possibly even to state-

law claims for breach of contract or fraud! Having a written ERISA

plan is therefore not only legally required, it simply makes good

business sense.


Q: What Documents Do I Need to Comply With ERISA? A: Employers must have two fundamental documents that describe

the plan – a written plan document and a summary plan description –

each of which must meet the requirements of ERISA. While

employers that sponsor insured health plans generally have an

insurance policy, the policy often does not constitute a plan

document. The plan document controls the operation of the plan.

There are a number of provisions that should be included in the plan

document. ERISA requires that the plan document designate a

"named fiduciary," who must be either designated by name or in a

manner capable of being identified, for example, by title. The named

fiduciary has the authority to control and manage the plan's operation

and administration. The plan document must also describe how the

plan is funded and how benefits are paid under the plan. The plan

document should also include a description of the individuals who are

eligible to participate in the plan.


Q: What Does a Summary Plan Description Require?

A: It is not uncommon for an employer to have a summary plan

description that is inadequate, or even to not have a summary plan

description at all. However, ERISA requires that every plan

participant be furnished with a summary plan description, commonly

referred to as an SPD. The SPD is intended to summarize the plan's

benefits, rights and features in a manner calculated to be understood

by the average participant. Certain information must be included in

the SPD, including: the plan name; the plan sponsor's name and

address; the sponsor's employer identification number; the type of

welfare benefit plan; the plan year; the plan administration method;

the plan administrator's name, address and phone number; the agent

for service of process; eligibility requirements to receive benefits; a

description of available benefits; the method or source of

contributions to the plan; the method of funding; an explanation of

claims procedures; and a statement of ERISA rights.


Q: What If I Sell the Company?

A: In the event of restructuring, mergers, changes in circumstances,

and other cost-cutting measures, employers must be certain to

adequately advise current employees about reductions in, or changes

to, their welfare plan benefits. Under ERISA, employers can alter,

change or discontinue any of their disability and welfare plan benefits,

as long as proper notice is provided to covered employees. This does

not include plans that are part of a collective bargaining agreement.


Q: What About Negligence Lawsuits? A: One of the biggest reasons employers choose not to opt out is

the fear of being sued. This is understandable, BUT most increased

liability costs can usually be traced to a lack of attention to workplace

safety. In addition, according to a Princeton study, nearly 60% of all

nonsubscriber cases settle prior to trial, 38% of those tried result in

no award, and almost 88% of awards in non-fatal accidents are for

$70,000 or less. There is also “Tort Reform,” which limits the

amount an injured employee might recover, as well as subrogation

and off-set claims, which might allow the employer to recover some

or even all of the ERISA benefits that were paid. Finally, there is

employer liability insurance to cover almost all potential losses, as

well as the possibility of arbitration to avoid “runaway” juries.


Q: Why Would Someone Sue Their Employer? A: An injured employee might sue a non-subscribing employer in

state court for damages arising from a work-related injury because of:

• Serious injury. • Bad claims management.

• Disgruntled or litigious employee.

A typical negligence claim involves the employer’s breach of a work-

related duty, and has included:

• The duty to furnish and maintain safe and suitable tools and equipment

• The duty to hire careful and competent co-workers

• The duty to establish and enforce safety rules

• The duty to protect against foreseeable criminal acts of third

parties

• The duty to provide adequate assistance in the performance of required work

• The duty to instruct employees on safe use and handling of

products and equipment


Q: How Can I Avoid a Lawsuit?

A: The good news is that most people are not interested in hiring a

lawyer and suing their employer, and historically the number of cases

compared to the number of actual injury claims is extremely low. The

bad news is that anyone can file a lawsuit. Usually, if that happens it

either involves a serious accident that results in permanent

disabilities, or it occurs when an employee’s benefit claims go unpaid

and he has no other choice. Under our program, we encourage

employers to adopt a safety program, which can help reduce the

potential for a major catastrophe. In addition, we make every effort to

handle employee injury claims quickly and efficiently, to make sure

that bill collectors do not force injured workers into the arms of an

attorney. Finally, with ADR in place, most lawsuits can be sent to

mediation or arbitration, where the dispute is usually resolved quickly

and with a minimum of disruption at work.


Q: Do I Really Lose All My Defenses? A: A non-subscriber cannot defend against a negligence action by

claiming:

• Negligence of a fellow employee • Assumption of the risk

• Contributory negligence of the employee.

BUT – many defenses are still available, including:

• Self-infliction • Intoxication

• Employee was the sole cause of the accident

• Horseplay

• Detour/course and scope

• Employee simply doing her job

• Failure to ask for available help

• Improper use (or misuse) of tools or equipment

• Danger was obvious

• Employer merely created a “condition” that allowed accident to

occur

• Injury caused by third party (such as a parts manufacturer, another driver, etc.)


Q: How Can I Tell When a Claim Is Suspicious?

A: There are several “tell tale” signs that an injury may not be what

it seems. Usually an employee injury claim is questionable when it

includes three or more of the following indicators:

• The employee refuses to cooperate with medical personnel

• The employee refuses to return to work despite a doctor's O.K.

• The employee has history of reporting subjective injuries

• The injury “occurred” on a Friday and is reported on a Monday

• The claim occurs after the employee has been terminated

• The type of injury is unusual in the employee's line of work

• The employee does not promptly report injury to supervisor

• The injury was not witnessed by anyone

• The reported accident occurred where the employee does not work

• The details of the accident are vague or contradictory

• The employee says he can’t work but does other things that

require full mobility

Using the AIS program, an employer has a much better chance of

rooting out bogus claims and denying benefits, and managing claims

that are worthwhile and need attention.


Q: How Does ERISA Affect a Negligence Lawsuit?

A: No Collateral Source Rule – the amount of paid benefits may

offset a subsequent liability award. For example, if an employer has

paid for occupational accident insurance through its ERISA Plan, and

an injured employee receives benefits under that Plan, then any

negligence award would have to be offset by that amount for those

types of damages.


Q: How Does ADR Work?

A: ADR means “Alternative Dispute Resolution.” In practice, this

means that a company can adopt a plan to send nearly all workplace

disputes to mediation or, if that doesn’t succeed, to final binding

arbitration. ADR may not apply to all claims (such as pre-existing

disputes or certain administrative matters like unemployment claims),

and it may not apply to all employers (such as those with collective

bargaining agreements). However, in the vast majority of cases,

ADR is available and an extremely useful tool.

There are several reasons for choosing to adopt an ADR

program, including: (1) speed and reduced litigation costs; (2)

privacy; (3) the absence of a jury (and their sometimes emotionally-

driven verdicts); (4) the “expert” status of most mediators or

arbitrators, which allows them to bring their own experience to the

resolution of a dispute; (5) the increased potential for settlement that

results from most mediators’ or arbitrators’ direct involvement in the

process; and (6) greater informality, which allows parties to get to the

heart of an issue.


Q: What Is Mediation?

A: Mediation is often the most straightforward and cost-effective

method of examining and resolving disputes. It is a meeting in which

a neutral third party, called a mediator, helps the parties come to an

agreement based on everyone’s needs and interests. Mediation

helps primarily by opening up communication and by coming up with

options. It is a non-binding process. That means the mediator can

make suggestions, but the employee and the employer are

responsible for mutually resolving the dispute.


Q: What Is Arbitration? A: Arbitration is a process in which a dispute is presented to a

neutral third party, the arbitrator, for a final and binding decision. The

arbitrator makes this decision after both sides present their

arguments at the arbitration hearing. There is no jury. The arbitration

service provider runs the proceedings, which are held privately.

Though arbitration is much less formal than a court trial, it is an

orderly proceeding, governed by rules of procedure and legal

standards of conduct.


Q: What Does a Good Non-subscriber Program Contain? A: Non-subscription is not for everybody – dangerous jobs,

employer unconcerned with safety, transient workforce, extensive history of claims.

• Adopt an ERISA Plan and comply with the TDI’s disclosure and

administrative requirements • Implement a safety program that includes regular audits, safety

training and testing, and assessing existing safety needs

• Communicate regularly with injured employees and create a “light duty” or “back-to-work” program

• Establish an ADR program, which includes mediation and

binding arbitration

• Obtain liability or other insurance, which will cover all or a substantial portion of any negligence award.


Please contact AIS for all of Your Non-subscription needs.

Accident Insurance Services, Inc. 9330 LBJ Freeway, Suite 300

Dallas TX 75243

Telephone: 972-991-0413 Toll-Free: 800-880-2515 Facsimile: 972-788-5108

http://www.ais-insurance.net