Most Arizona businesses with employees are required to pay for workers' compensation insurance (WC or workers' comp insurance). The insurance provides compensation to employees who suffer work-related injuries. Here are some basic facts that you need to know about workers' comp insurance in Arizona as a business owner and employer.
Even if your Arizona business has just one employee, and even if that employee is part-time, a minor, an alien, or a family member. An exception applies to domestic servants in private homes. WC insurance is not required for independent contractors or for workers whose work is "casual" and not part of the employer's usual business. In addition, some business owners, such as members of LLCs, corporate officers, partners in partnerships, and sole proprietors, are not required to be covered by workers' compensation insurance. However, employees of any of those businesses, including, for example corporate officers who are also employees, are required to be covered by workers' comp insurance.
The Industrial Commission of Arizona (ICA) is the primary state agency that handles workers' comp claims. Most of the law for WC insurance is contained in Arizona's Title 23 of the Arizona Revised Statutes, which covers the ICA. In addition, Title 20 Chapter 5 of the state's administrative rules also cover the ICA.
In Arizona, workers' compensation insurance is available through private insurance companies. The ICA has a webpage that provides a long list of companies licensed to issue WC insurance in Arizona. There is also an option to self-insure, but this may not be advisable for smaller businesses, in part because it requires that a lot of money be set aside to cover potential claims.
An injured employee must report the accident or injury to the employer. The employee also must not delay getting treatment. After reporting the injury to the employer, the employee must file a claim with the ICA.
When you are notified of an employee injury you must provide the employee with the name and address of your workers' comp insurance carrier, your policy number, and the coverage expiration date. You must also notify your WC insurance carrier and the ICA within ten days of being notified of the injury. Use Form 0101, Employer's Report of Injury. You can submit the form online.
Beyond these initial steps, there are subsequent steps to the WC claims process, not covered here.
If you think your employee's workers' comp claim is partly or totally invalid, you can dispute it with your insurance carrier. You or your carrier have 21 days to accept or deny a claim from the date it's filed. If you don't object within 21 days, the claim is considered to be accepted. Unlike in some other states, employers and insurers initially don't need to formally contest claims because they make the initial decision whether to allow the claim.
If an employee disagrees with an employer or insurer's claim denial, the employee can arrange for a hearing before an ICA administrative law judge. The hearing is not as formal as in a state court. The employer or employee can subsequently appeal a decision to the state Court of Appeals.
If you don't carry workers' compensation insurance, an employee can sue you for damages in state court. Alternatively, the employee file a claim with the ICA. In that case, the ICA will pay the employee's benefits from the state's so-called Special Fund. The state then will seek reimbursement from you for any benefits paid plus a penalty of 10% of benefits paid or $1,000, whichever is greater. Moreover, you may be assessed a separate, initial penalty of $1,000 just for not having workers' comp insurance, and if you do not subsequently get WC insurance, additional penalties of $5,000 and then $10,000.
There are many other workers' compensation requirements for Arizona employers, such as putting up posters about workers' compensation coverage where employees can see them. The Nolo website has a section devoted to workers' compensation. In addition, the ICA website also contains a few useful resources including an employers' FAQ document.