Who Pays When Someone is Injured While Working for an Employer Without SC Workers Comp Insurance
You have been seriously injured while at work and on-the-job. Now you learn that your employer has let their workers compensation insurance lapse or never had it in the first place. Is this the end of the story for you and your family? In South Carolina, the answer is NO. If you find yourself in this situation, the process can be complicated, but ultimately, your medical bills, lost wages, and permanent disability will be paid by the SC Uninsured Employers Fund. While there may be unscrupulous employers who start out with the intention of not carrying the necessary and required SC workers compensation insurance, many otherwise good companies simply have a downturn in their business and cannot afford to maintain insurance. Not surprisingly, the most dangerous jobs carry the highest SC workers compensation insurance premiums. Construction businesses, and roofers especially, have premiums that can easily become their highest expense second only to labor costs. But when the economy slows, payments of those premiums can get behind or even lapse, and policies get cancelled. When someone gets hurt, the employer will be ultimately found to be operating as an illegal self-insured business. Thankfully, in South Carolina, our legislature has provided for a backup system of workers comp payments. For those who want to review the law itself, we have included it here.
In relevant part, SECTION 42-7-200 “Workers’ Compensation Uninsured Employers’ Fund; claims”
- (A)(2) There is hereby established, within the office of the State Accident Fund, the South Carolina Workers’ Compensation Uninsured Employers’ Fund. This fund is created to ensure payment of workers’ compensation benefits to injured employees whose employers have failed to acquire necessary coverage for employees…effective as of July 1, 2013. (Previously, the UEF was administered under the SC Second Injury Fund which has since been dissolved).
- (B) When an employee makes a claim for benefits pursuant to Title 42 and the State Workers’ Compensation Commission determines that the employer is subject to Title 42 and is operating without insurance or as an unqualified self-insurer, the Commission shall notify the fund of the claim. The fund shall pay or defend the claim as it considers necessary in accordance with the provisions of Title 42.
- (C) When the fund is notified of a claim, the fund may place a lien on the assets of the employer by way of lis pendens or otherwise so as to protect the fund from payments of costs and benefits. Any of the employer’s assets sold or conveyed during the litigation of the claim must be sold or conveyed subject to the lien.
- (D) The fund has all rights of attachment and has the right to proceed otherwise in the collection of its lien in the same manner as the Department of Revenue. When all benefits due the claimant, as well as all expenses and costs of litigation, have been paid, the fund shall file notice of the total of all monies paid with the clerk of court in any county in which the employer has assets and with the Secretary of State. This notice constitutes a judgment against the employer and has priority as a first lien in the same manner as liens of the Department of Revenue. If the employer files for bankruptcy or otherwise is placed into receivership, the fund becomes a secured creditor to the assets of the employer in the same manner as the Department of Revenue has priority for unpaid taxes.
From the Employer’s Perspective
As you can quickly determine, this law has serious bite to it. Once the UEF is triggered, the Fund has substantial legislative powers to impose liens and, if necessary, to seize assets in whatever SC county they may be located. Even declaring bankruptcy will not shield an employer who violates this statute. The only liens that supersede the UEF is the SC Department of Revenue and, of course, the United States Treasury. In many cases, the finding that an employer is operating outside of the Workers Compensation Act is clear, and the parties will reach an interim “capitulation” agreement. And, at the end of the case when all damages have been paid, the UEF will oftentimes negotiate with an aggrieved employer to settle its claim.
The Process of Pursing Benefits for the Injured Employee
From the injured workers perspective, the process usually goes this way. Without an agreement, the UEF must first litigate the issue of whether the employer is within the Act and operating illegally as a self-insured. Once this finding is made, the UEF assumes the claim, and the Claimant’s case proceeds. The UEF can admit or deny any or all aspects of a claim, including compensability, medical treatment, lost time benefits, and disability issues. Instead of litigating against a private SC workers compensation insurance carrier, the Claimant is now fighting against the State agency UEF. All issues can be aggressively defended and even appealed. The process can take significantly longer than the usual case unless the illegal employer enters into an agreement with the UEF. Also, without the employer’s participation and consent, the UEF and the injured worker cannot negotiate a settlement. Instead, every case has to be litigated before the Commission and a formal Decision and Order issued. Otherwise, the employer may assert that the UEF operated outside of its legislative authority and any settlement agreement cannot be enforced against them.
Here in Rock Hill SC, I have litigated numerous uninsured employer workers’ compensation claims. Back during the 1990s, we had good economic growth and industry here in York County. The big companies followed the rules and had SC workers comp insurance for its workers. Even then though, there were a few smaller construction businesses that “took chances” with their employee’s future. Fortunately, the UEF was there for them when bad things happened. In 2006, I opened my own firm in Fort Mill SC. While the explosive grown was just beginning, we have really seen a substantial increase in new building construction both here and in nearby Indian Land SC. While we are all grateful for the return of good paying construction jobs, we also hope builders and other employers in dangerous industries will do the right thing and take the necessary steps to protect and insure their workers. If they do not, the South Carolina Uninsured Employers Fund will be there to provide necessary and critical SC workers comp insurance for injured employees and their families.