AP Decision Manual: Existence of Coverage

The Division of Workers’ Compensation publishes and maintains the appeals panel decision manual. The manual is prepared under the supervision of the Appeals Panel. It serves as a guide for use by the Appeals Panel in deciding appeals of hearing officer’s contested case hearing decisions.

The primary purpose of the guide is to help the Appeals Panel achieve consistency in its decisions and to inform its customers of the legal principles it expects to follow in deciding appeals. Due to the changing nature of the law, the manual is supposed to be updated frequently.

The Division describes the decision manual as an abbreviated summary of selected aspects of Texas workers’ compensation law. An accurate understanding of the law covered in the manual will almost always require reading the Act, rules, and cases referenced. The content of the manual does not constitute official DWC policy. Use of the manual is not intended to be a substitute for obtaining legal counsel or advice.

Flahive, Ogden & Latson does not always agree with the Division’s interpretation of the law, as described in the manual. However, the AP Decision Manual is frequently a beginning point for independent legal research.

In this article, we highlight the decision manual’s comments on the existence of coverage.

Existence of Coverage (C01)

Section 401.011(44) lists three methods to provide workers’ compensation insurance coverage:

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

See also Section 406.003.

Except for public employers and as otherwise provided by law, whether or not an employer provides workers’ compensation insurance coverage is optional with that employer. Section 406.002(a). If an employer elects to provide workers’ compensation coverage, recovery of workers’ compensation benefits is the exclusive remedy of an IW or his or her legal beneficiary against the employer for the death of or a work-related injury sustained by the IW. 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 is not prohibited. Section 408.001(b).

Actual coverage of the IW is a threshold requirement for establishing the liability of an IC. APD 022268-s.

Cancellation or Non-Renewal of Coverage by the IC.

An IC that cancels or does not renew a worker’ compensation insurance policy by its anniversary date is required to deliver notice of the cancellation or non-renewal. The notice is required to be delivered by certified mail or in person to the employer and the Division not later than the 30th day before the date on which the cancellation or non-renewal takes effect. However, 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:

1. fraud in obtaining coverage;
2. misrepresentation of the amount of payroll for purposes of premium calculation;
3. failure to pay the premium when due;
4. an increase in the hazard for which an employer seeks coverage; or a determination made by the commissioner of insurance that the continuation of the policy would place the insurer in violation of the law; or
5. 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. Section 406.008. The IC has the burden of proof to show compliance with Section 406.008. APD 981597.

IC Failed to Establish Cancellation or Non-Renewal.

The IW’s date of injury was August 20, 2002. 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 HO determined that the IC did not provide workers’ compensation coverage for the subclaimant/employer. The HO’s determination was reversed and a new decision rendered that because the IC failed to establish that it gave notice as required by 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 August 20, 2002. There was no evidence that the IC gave notice of non-renewal of coverage by certified mail or in person to either the employer or the Division at any time much less than the required time frames in Section 406.008. The AP held that the IC failed to comply with the requirements of 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 the Division by certified mail not later than the 10 th day after the date on which the employer notified the IC to terminate coverage. Termination of coverage takes effect the later of the 30 th day after the date of filing of notice with the division 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. Section 406.007.