Arizona workers’ compensation insurance

Every Arizona business that regularly has one employee or more is required to carry workers’ compensation insurance. All employees, full-time and part-time, must be covered.

The Industrial Commission of Arizona (ICA) regulates workers' compensation in the state. Some coverage exceptions include independent contractors, casual or occasional workers, and domestic workers who are only employed in a home.

Sole proprietors and independent contractors are not required to have Arizona workers’ compensation insurance coverage, though they could elect to carry coverage for themselves. However, if the sole proprietor of a business hires employees, those people must be covered.

Even when you're exempt, it can be a smart business decision to buy workers' comp. Your health insurance provider might deny a claim related to a work injury, which could leave you paying for expensive medical bills. Workers' comp covers medical expenses and also provides part of the wages that you'd otherwise miss while recovering from an injury.

You’re not required to provide workers’ compensation insurance for independent contractors or subcontractors in Arizona. However, be sure that the worker qualifies as a contractor. Disputes sometimes arise over employee classifications, and a contractor could be considered an employee.

If a case gets to court, these factors will be considered to determine whether a worker is a contractor or an employee:

• Duration of employment
• Method of payment
• Right to hire and fire
• Extent of the employer’s control over how work is performed
• Ownership or supply of tools and materials
• How work hours are set
• Whether work was performed in the regular course of business

Even if you think you’re hiring an independent contractor, look at the totality of the circumstances to make sure you’re not required to provide workers’ compensation.

Additionally, here's what your workers' comp policy won't cover:

• Injuries caused by intoxication, drugs, or company policy violations
• Injuries claimed after a firing or layoff
• Wages for a replacement worker
• Occupational Safety and Health Administration (OSHA) fines

Insurance providers use a specific formula for calculating workers' comp premiums:

To save money on workers' comp insurance, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure. This also helps you avoid misclassification fines.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

A ghost policy is a cheap option in some states, though it is not permitted in Arizona. A ghost policy is a workers' comp policy in name only. It provides no protection, but can fulfill contractual requirements for a workers' comp certificate at a reduced price.

Finally, a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

Workers' compensation covers the cost of medical treatment for workplace injuries and occupational illnesses. Injured workers typically receive two-thirds of their regular monthly wage during recovery.

Other workers' comp benefits include compensation for partial disabilities and permanent disabilities, vocational rehabilitation for serious injuries that impact a worker's ability to perform their job, and death benefits for workplace fatalities.

Policies typically include employer's liability insurance, which helps pay a business's legal expenses if an employee blames their injury on the employer's negligence and files a lawsuit.

Under Arizona law, workers' comp claims are based on a no-fault system. Workers receive medical benefits and compensation regardless of the cause of a job-related accident, if eligibility conditions are met.

Filing a workers' compensation claim must be done within a specific time frame. Employers must submit an Employer's Report of Injury form within 10 days of receiving notice about an accident. Injured workers must submit a Worker's Report and Physician's Report of Injury form within a year of when the injury occurred (or when the claimant became aware of it) to receive workers' comp benefits.

Arizona has a workers' compensation fee schedule, updated annually, that sets what healthcare providers get paid for providing different types of medical treatment.

As part of the claims process, an employee gives up the right to sue their employer once they've accepted workers' compensation benefits. This provision is called the exclusive remedy.

The Industrial Commission of Arizona has stiff penalties for failing to carry workers' compensation insurance when it's required.

Additionally, an injured employee could sue you, which would likely result in far more expensive damages than the premium you would have paid for insurance.

If the employee files a claim with the ICA and isn’t covered with an active policy at your business, the ICA's Special Fund Division will pay the benefits. It would then charge you for reimbursement, plus a penalty of 10% of any benefits paid or $1,000 (whichever is greater).

You can also be charged a separate penalty of $1,000 just for not having the correct insurance, and additional penalties of $5,000 and eventually $10,000.

If a worker dies on the job, their survivors might be eligible to receive workers’ comp death benefits. These benefits are available to a spouse, children, or other dependents who rely on the deceased person for financial support.

These survivors are eligible for death benefits:

• Spouse
• Child under 18 years old
• Child under 22 years old who is a full-time student
• A child of any age who is unable to be self-supporting

If there are no children or surviving spouse, parents or siblings who are under the age of 18 and who depend on the deceased worker for financial support could also qualify to receive death benefits.

The surviving beneficiaries can receive a combined 67% of the worker’s average monthly wage, up to a statutory maximum that increases each year.

Workers’ comp benefits in Arizona also include up to $5,000 in burial expenses.

Arizona's state law for workers' compensation settlements is for “full and final” settlements. That means parties may settle accepted claims with approval by the ICA.

Those settlements must include projected future medical costs and a statement that the parties have reasonably tried to protect Medicare interests, which could include a Medicare savings account.

A workers’ compensation settlement benefits both the employer and the employee. The employee receives a lump sum payment or a structured settlement that is paid in installments over a set period of time. The employee also gives up the right to future benefits, which means that the employer will no longer be liable for legal expenses associated with that claim.

Injured workers have one year from the date of injury to file a claim. Workers have a responsibility to notify the employer as soon as possible when an injury has occurred. Once the employer's insurance company has received the claim notice, it has 21 days to accept or deny it.

If an insurance carrier denies a claim, the worker is required to request a hearing within 90 days of the date of the denial notice.

The ICA's Claims Division does not provide legal advice, so you may want to contact a workers' compensation attorney for disputes about claims or settlements.

If you are ready to buy a workers' compensation policy, start a free application with Insureon to compare quotes from top-rated insurance carriers. A licensed insurance agent will help answer your questions and explain your coverage options. Once you find the right policy, you can usually begin coverage and get your certificate of insurance in less than 24 hours.