How does workers' comp work in Arizona?

Arizona state law requires all employee to cover employee under a workers' compensation policy. Coverage is required even if the employee is part-time. Its also required for minors and family members.

While coverage is not generally required for independent contractors, there are often disputes over who qualifies as an independent contractor. Factors considered to determine independent status include supervision, duration of work performed, control of work product, and if work is a usual part of the employer's business.

It is currently unclear as to whether or not Arizona considers and LLC member an employee for workers' compensation. Most insurance companies treat LLC Members the same as Officers of a corporation.

Workers' Comp Rules & Information for Arizona

Who needs Workers' Comp in Arizona?

In Arizona, most businesses that have employees regardless of whether they are full or part time, or relatives of the owner, must carry workers compensation insurance. Under the applicable law certain limited exceptions listed below apply:

  • Farm Workers
  • Domestic servants in a home with fewer than 2 full time employees
  • Persons eligible for compensation under federal law. (Maritime and railroad workers)
  • • Independent contractors are exempt provided they are actually determined to be such. If misclassified and later determined to be actual employees the business owner can be liable for the unpaid premiums and any fines or penalties and medical expense incurred by the employee
  • Employers can voluntarily purchase workers' compensation insurance licensed in the State:
  • Or employers can obtain workers' comp insurance by applying to become certified as self-insured. Either way, you are required to post a notice of workers' compensation which indicates which insurance carrier insures the business or that you are self-insured. The business must make Rejection Notices available to workers. Any employee can reject the employer’s workers compensation insurance. If exercising their rights to reject the workers' compensation insurance the employee must deliver a signed dated copy to you. An employee may later rescind this notice voluntarily up until the point where he or she suffers a workers' comp injury by informing you in writing. The owner should file this with his or her carrier

Does Arizona Allow Worker’s Comp Exemptions for Owners?

Sole proprietors, LLC members and partners are not considered to be employees and are excluded from coverage, but may elect to be included. If they choose to be included they must give notice to the insurance carrier by filing a Notice of Election or Rejection of Coverage Form. Additionally, the owner must be endorsed on the policy.

What are the Penalties for not Having Workers' Compensation in Arizona?

Both civil penalties and criminal penalties exist in AZ. Willfully and knowingly failing to carry workers' compensation insurance is a Class 6 felony under state law which is punishable by up to one year in prison. Additionally, civil penalties include that the employees are given a choice whether they want to proceed in civil court on a tort claim rather than filing a complaint under the state workers' comp laws. If the employee elects to file a civil claim a presumption of negligence arises against the employer. The employee can seek a far greater recovery against the employer than what would be awarded in workers comp cases. They can also obtain attorney’s fees.

If they choose to file as a workers' comp case the case if referred to the Special Fund/No Insurance Division. The special fund will pay for all the recoverable elements of a workers' comp recovery and then seek reimbursement from the employer along with an assessment of 10% of the damages or $1000.00, whichever is greater, together with interest. In a civil suit, the employee sues in tort for the full amount of damages which usually amounts to a much higher amount of damages than proceeding under workers' compensation laws. Additionally the Industrial Commission Association can seek an injunction to close down the business until they obtain workers' comp insurance.

When do I get an EMR Rating in AZ?

All businesses start without an experience modification rate. Their effective EMR Rating is 1.00, which is a neutral because it does not increase or decrease premium and makes no adjustment to an insurance carriers workers' comp rates. In AZ, a business qualifies for an EMR rating when its payroll reaches an amount which generates $6,0000.00 in policy premium for the last 2 years or $3,000 for more than 2 years.

How Long do You Have to Report an Injury at Work in Arizona?

The employee has 90 days to notify their employer of any and all work injuries with 1 year to file a claim. If they fail to notify the employer within that time they could be denied benefits by the court. The employer must immediately notify the injured worker of the name and address of the insurance carrier, the policy number and the date of expiration of the policy. The employer must also notify the carrier and the Industrial Commission of Arizona within 10 days of Notice of the Injury from the time the employee gives notice, or upon actual knowledge of the employer, to file an Employer’s Report of Industrial Injury. In a fatality situation the Employer must notify the ICA immediately by phone or telegraph.

How Long can an Employee Remain on Workers' Comp After a Claim?

Arizona differs significantly from other states. Employees can receive weekly benefits while they are on temporary total disability, permanent partial disability or permanent disability period benefits. Generally, a worker is paid 66 2/3's of their regular monthly payroll for a monthly maximum of $ 4,741.00 while on TTD, and an additional $25.00 per month per dependent.

Payments do not end until the employee (1) has returned to work (2) the employee will not reach any significant improvement, or (3) the employee is capable of returning to the same or similar work. If the employee becomes totally and permanently disabled they will receive permanent total disability benefits for life at the same rate as received for TTD.

If permanently injured but can work in some capacity, injured workers can receive permanent partial disability benefits you can receive up to 100% of loss of earning capacity and 66 2/3 of average monthly wages which can be payable for life.

Arizona State Regulation for Insurance

Arizona Department of Insurance
2910 North 44th Street Ste 210
Phoenix AZ 85018

Arizona is an NCCI State

Arizona utilizes NCCI as its state rating authority and bureau. This means that all data and rates are administered by NCCI. NCCI also administers the State Fund program in Arizona for Residual Market coverage. Employers who are unable to find private coverage may purchase insurance from NCCI.

CopperPoint Mutual

Formerly known as SCF Arizona. CopperPoint is no longer the preferred State Fund carrier in Arizona. Employers are not required to receive a declination letter from CopperPoint prior to seeking Residual Market quotes via an NCCI appointed agency.

Arizona is a No Fault System

All injured employees are eligible to receive medical and compensation benefits for work related accidents. Even if the employee was at fault for the injury in some capacity, they will be entitled to benefits under a no fault system.

Obtaining Workers' Comp in AZ

Workers compensation coverage can be obtained from any insurance company licensed to issue workers' comp policies in Arizona. A list of licensed companies can be obtained from the Arizona Department of Insurance (800-325-2548). Coverage should be purchased from a licensed agency doing business with one or more of these companies.

Arizona Self-Insurance

Some larger employers with significant assets may apply for permission to become self-insured for workers compensation insurance. Permission must be granted by ICA (Industrial Commission of Arizona). Self-insured employers must post a notice of workers' comp advising all employees of their coverage. They must also provide rejection notice forms for employee who may choose to reject their employers' self-funded coverage.

Medical Direction in AZ

Arizona employers may direct injured employees to a doctor of their choice for a one-time evaluation. After one visit, the employee may choose to utilize the directed physician or seek treatment with a physician of their choice.

Owner Inclusion and Exclusion Information

See Arizona Coverage Requirements.

State Insurance Directives Regarding Covid-19

AZ “urges” insurers to help policyholders to maintain coverage during the emergency by offering relief, such as: 1) refraining from cancelling/non-renewing policies due to non-payment; 2) granting a premium payment grace period; 3) providing premium payment plans; 4) waiving late fees, interest, and penalties; 5) delaying premium increases; 6) suspending the use of credit reports for rating; 7) refraining from cancelling auto policies due to deferred expiration of driver's license pursuant to the Governor's Executive Order 2020-08; 8) extending timeframes for health providers to submit claims; 9) extending timeframes for policyholders to replace or repair in order to ensure recovery of withheld depreciation; and 10) extending timeframes to undergo medical examinations.  AZ encourages insurers to continue to provide relief even after the emergency is lifted.

Discretionary order in effect from 04/16/2020 until further notice.

State Orders Regarding Insurance Claims Related to Coronavirus

No current state orders.

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We work with our national insurance partners to develop targeted programs with easier underwriting requirements and lower rates. We offer a broad range of business class codes that help streamline the quote process so you get the lowest price for coverage.

Knowing the Arizona workers comp requirements can help lower the cost of coverage.

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Arizona Work Comp Information

AZ Compliance and Claims

If an employee is injured on the job and the employer does not have coverage, the employee may file a civil lawsuit against the employer with the ICA. The Special fund will typically pay the claims and seek reimbursement plus 10% from the employer.

Failure to carry workers compensation is a felony charge in Arizona. Civil penalties vary between $1,000 and $10,000 depending on the number of offenses. A Superior Court in Arizona may also shut a business down for non-compliance.

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Workers' Comp Includes Employers Liability Insurance?

Employers liability insurance is an additional layer of coverage included as part of a workers' compensation insurance policy. Employers Liability is known as Part 2 of the policy. It adds two additional coverages for employers:

Employers Legal Liability and Legal Defense Costs

In today's world, there are a variety of reasons employees and third-parties sue employers for damages. Here a some common types covered by employers liability insurance:

Third Party Lawsuits

Your employee sues another party that may have contributed to the injury, In turn, the third party sues your business.

Consequential Bodily Injury

Another party or individual is injured while providing care for the injured employee.

Dual Capacity Legal Action

An employee files a claim but also attempts to sue the employer for being responsible in other ways outside of the employment relationship.

Loss of Consortium

A spouse sues for damages caused by the loss of companionship or relations.

Employers Liability coverage is not included with coverage in the four monopolistic states. Employers in these states can endorse this coverage onto their General Liability policy. That coverage is commonly known as Stop Gap Coverage.

Workers' Comp Covers AZ Employers from Injury Related Expenses & Lawsuits
Employers liability insurance is included under a workers' comp policy in most states.
  • Employers liability coverage is not included in all monopolistic states.
  • All NCCI and most other states' coverage includes employers liability insurance.
Visit NCCI for more resources and information about workers' compensation class codes. Visit United States Department of Labor for more information about government agencies managing workers compensation insurance rates.

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