Texas Workers' Compensation Glossary | 4J Insurance Brokerage

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These are the terms that appear on an Information Page, in a premium audit worksheet, on a benefit dispute notice, and in the endorsement schedule nobody read closely. Each is defined in the sense the document is actually using it, with the standard cited where one applies.

This glossary defines only the terms the Texas workers' compensation system owns. 4J documents each concept once, on the page or glossary that owns it. Terms defined elsewhere are linked, not repeated:

Liability mechanics — occurrence, claims-made versus occurrence, additional insured and certificate of insurance are defined in the general liability glossary.
Surety and contract terms — performance bond, payment bond and indemnity agreement are defined in the surety glossary.
Benefits and eligibility — applicable large employer, affordability safe harbor and minimum essential coverage are defined in the group health glossary.

Definitions describe general market usage and the standards as they stand. Your policy wording, endorsements and the Texas Labor Code control. Nothing here interprets a specific policy, form or claim, and nothing here is legal advice.

The policy itself

NCCI Standard Policy

The Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00, filed by the National Council on Compensation Insurance and used by nearly every carrier writing this line. Because the form is standard, the definitions inside two competing quotes are usually identical. What actually differs is what gets typed onto the Information Page and which endorsements rewrite it.

Information Page

The first page of the policy, equivalent to a declarations page. It carries the named insured, the policy period, the states covered, the employers liability limits, the classifications and estimated payroll, and the endorsement schedule. Reading it is the fastest way to know what you actually bought.

Part One, Workers Compensation Insurance

The section that pays the benefits a state workers compensation law requires. It has no dollar limit, because the limit is whatever the statute says it is.

Part Two, Employers Liability Insurance

The section that responds when an employee sues the employer directly rather than claiming statutory benefits. Unlike Part One it does carry dollar limits, typically shown three ways: bodily injury by accident each accident, bodily injury by disease policy limit, and bodily injury by disease each employee.

Part Three, Other States Insurance

The section that extends coverage to states not listed at Item 3.A, so that an unplanned job in another state does not land uninsured. Whether you have it, and how much of it you have, is one of the most consequential things on the Information Page.

Part Four, Your Duties If Injury Occurs

The conditions you agree to meet after a loss: prompt notice, cooperation, preservation of the carrier's recovery rights, and no voluntary payments. Ignoring Part Four is a common and avoidable way to create a coverage argument.

Endorsement

An attached form that changes the standard policy. Endorsements can add coverage, remove it, or rewrite a section entirely. A policy is the standard form plus its endorsements, and the endorsement schedule is where the real differences between two carriers live.

What the Information Page actually says

Item 1, Named Insured

The entity or entities covered. Related companies, holding entities, and newly formed subsidiaries are not automatically included simply because they share ownership. If you operate through more than one entity, each one generally needs to appear.

Item 2, Policy Period

The term of coverage, running from 12:01 a.m. on the effective date to 12:01 a.m. on the expiration date at the insured's mailing address.

Item 3.A, Covered States

The states whose workers compensation law Part One applies to. A policy listing only Texas provides Part One benefits only under the Texas Act. Some policies list a single state here and push the rest to an endorsement, so the schedule has to be read alongside the Information Page.

Item 3.B, Employers Liability Limits

The three Part Two limits. One million each accident, one million policy limit for disease, and one million each employee for disease is the common commercial structure, though lower limits are still written and are worth catching before a contract requires higher ones.

Item 3.C, Other States Insurance

The single most revealing line on the page. It may list a group of states, it may say "all states except" and then name the monopolistic four, or it may say "None." Where it says None, an employee injured on a job outside the listed states is not covered by Part One at all.

Item 4, Classifications and Estimated Premium

The class codes, the estimated payroll for each, the rate applied, and the estimated annual premium. Because premium is estimated, the final number is set later by audit.

Monopolistic State

A state where workers compensation may only be bought from the state fund, so a private carrier cannot write Part One there. North Dakota, Ohio, Washington and Wyoming. This is why so many Other States endorsements read "all states except" those four, and why employers operating there need a separate state fund account plus stop gap employers liability.

Stop Gap Coverage

Employers liability coverage bought for monopolistic states, where the state fund provides the statutory benefits but no Part Two protection. Without it, an employee lawsuit in one of those four states has no policy behind it.

Working outside Texas

Extraterritorial Coverage

The principle that a Texas policy may follow a Texas employee who is temporarily working in another state. Section 406.071 of the Labor Code sets the conditions, and the central one is that the employment relationship must have been established in Texas. A worker hired or recruited in another state to work in that state is generally outside it.

Limited Reimbursement Endorsement

An endorsement used by at least one major Texas carrier that deletes Part Three entirely and substitutes a reimbursement promise. Under it the carrier does not pay the other state's benefits directly. You pay them first, and the carrier reimburses you afterward, and only if a chain of conditions is met: the employee qualified for Texas benefits, the out of state work was temporary, the employee made a written election of the other state's benefits instead of Texas benefits, and you notified the carrier of that election within ten days. A policy carrying this endorsement and reading "None" at Item 3.C is not the same product as one with real Other States Insurance, even though both are the same standard form underneath.

Reciprocity

An arrangement between states recognising each other's coverage for temporary work, reducing the need to file in both. Reciprocity is uneven, and relying on it without checking the specific states involved is a common way to discover a gap after a claim.

Who is covered, and who is not

Employee

Under the Texas Act, a person in the service of another under a contract of hire, whether express or implied, oral or written. The label on the paperwork matters far less than the working relationship.

Independent Contractor

A person who contracts to perform work while retaining control over the means and details of the work. Genuine independent contractors are not your employees for compensation purposes, but the determination turns on control in practice, not on what a contract calls someone.

Subcontractor

A contractor performing part of your work. If a subcontractor has no coverage of its own, its employees may end up on your policy at audit, and you may end up paying premium on their payroll.

Certificate of Insurance

Evidence that a policy existed on the date the certificate was issued. It is not the policy and it does not amend the policy. Collecting certificates from every subcontractor before work begins is the practical defense against uninsured subcontractor payroll appearing on your audit.

Alternate Employer Endorsement

An endorsement extending your policy to protect a client company as though it were the employer, for the workers you send there. Standard in staffing and labor supply arrangements, where the client wants protection but the workers stay on your payroll.

Labor Contractor

A business that supplies workers to a client company. Which party carries the compensation coverage, and whose Information Page the payroll appears on, is a matter of contract and should never be assumed.

Professional Employer Organization

A co-employment arrangement, licensed in Texas, in which the PEO becomes an employer of record for payroll, benefits and often workers compensation, while the client keeps day-to-day direction of the work. When a PEO relationship ends, coverage does not follow the workers automatically.

Sole Proprietor and Partner Election

Owners, partners and certain corporate officers are not automatically covered as employees in Texas. They can be included by endorsement, and their payroll then enters the premium calculation, usually at a scheduled amount rather than actual earnings.

Executive Officer Inclusion or Exclusion

An endorsement adding or removing named corporate officers from coverage. Excluding an officer lowers premium and removes that officer's protection entirely, which is a genuine trade rather than a saving.

Volunteer

Generally not an employee, because there is no contract of hire. Certain public and emergency service volunteers are treated differently by statute, and a volunteer who is compensated in any form may not be a volunteer at all.

Premium, payroll and classification

Classification Code

A four digit code describing the type of work performed, used to group employers with similar exposure. The governing classification is the one describing your principal business, and misassignment is one of the most common and most expensive errors on a policy.

Payroll, or Remuneration

The premium basis. It includes wages, commissions, bonuses, holiday and vacation pay, and the value of certain non-cash compensation. Overtime is generally included at straight time, with the premium portion excluded when records separate it.

Manual Rate

The rate per one hundred dollars of payroll for a given class code, before any modification for your own loss history.

Experience Modifier

A factor that adjusts your premium up or down based on how your loss history compares with other employers in the same classifications. A modifier of 1.00 is average. Below 1.00 earns a credit, above 1.00 a debit. It is calculated from a three year window that excludes the most recent policy year, so today's claims affect the bill you pay two years from now.

Split Point

The dollar threshold separating the primary portion of a claim, which counts heavily in the experience modifier, from the excess portion, which counts far less. The effect is that claim frequency drives the modifier more than severity does. Texas uses a state specific split point of sixteen thousand five hundred dollars for rating dates on or after 1 July 2024, rather than the countrywide figure.

Primary Losses

The portion of each claim at or below the split point. Because primary losses are weighted most heavily, several small claims can damage a modifier more than one large one.

Premium Audit

The post term review comparing estimated payroll and classifications with what actually happened, producing an additional or return premium. Policies are written on estimates, so an audit is not a penalty, it is the settlement of the bill.

Audit Noncompliance Charge

An additional premium a carrier may charge when an insured fails to cooperate with the audit. Added by endorsement, it can be a substantial multiple of the estimated premium, and it is entirely avoidable by responding.

Minimum Premium

The smallest premium the carrier will accept for issuing a policy, regardless of how little payroll the audit ultimately develops.

Deductible Program

An arrangement in which the employer reimburses the carrier for the first portion of each claim in exchange for lower premium. In Texas the election is documented, and the employer is choosing to take on the frequency it can predict in order to price the severity it cannot.

Assigned Risk

Coverage provided through the residual market to employers who cannot obtain it voluntarily. Available, more expensive, and usually a signal that the loss history or the classification needs attention.

Benefits a Texas injured worker receives

Compensable Injury

An injury arising out of and in the course and scope of employment, for which benefits are payable under the Act. Both halves matter: the work must have caused it, and it must have happened in the course of the work.

Course and Scope of Employment

Activity that furthers the employer's business. Commuting is generally outside it, with recognized exceptions such as travel that is itself part of the job or transportation the employer provides.

Occupational Disease

A disease arising out of and in the course of employment, including repetitive trauma. Ordinary diseases of life are excluded unless the work created a materially greater risk than the general public faces.

Average Weekly Wage

The wage figure used to calculate income benefits, generally drawn from the thirteen weeks before the injury. Nearly every income benefit is a percentage of this number.

State Average Weekly Wage

A figure the Texas Department of Insurance recalculates each year, effective 1 October, from which the maximum and minimum weekly benefit amounts are derived. The maximum that applies to a given claim is the one in effect on the date of injury, and it does not rise afterward simply because the annual figure does.

Temporary Income Benefits

Paid while the worker has not yet reached maximum medical improvement and is losing wages because of the injury. They replace a percentage of the difference between pre-injury and post-injury earnings.

Impairment Income Benefits

Paid after maximum medical improvement, based on the impairment rating, at three weeks of benefits for each percentage point of whole body impairment.

Supplemental Income Benefits

Available after impairment income benefits end, to workers with an impairment rating of fifteen percent or more who meet ongoing work search and earnings requirements. They are applied for quarterly rather than paid automatically.

Lifetime Income Benefits

Paid for the remainder of the worker's life for a defined set of catastrophic injuries, including total blindness, loss of both hands or both feet, certain spinal injuries producing permanent paralysis, and severe burns.

Death and Burial Benefits

Paid to eligible beneficiaries when a compensable injury causes death, together with a statutory allowance toward burial expenses.

Maximum Medical Improvement

The point at which further material recovery from the injury is no longer reasonably anticipated, or the statutory deadline, whichever comes first. It marks the transition from temporary to impairment benefits.

Impairment Rating

A percentage expressing permanent whole body impairment, assigned by a doctor using the edition of the AMA Guides the Act specifies. It drives the duration of impairment income benefits and the gateway to supplemental benefits.

Designated Doctor

A doctor appointed by the Division to resolve disputed questions such as maximum medical improvement, impairment rating, extent of injury, or ability to work. The designated doctor's opinion carries presumptive weight.

Treating Doctor

The doctor the injured worker selects to coordinate care. Changing treating doctors is permitted but procedurally controlled.

Medical Benefits

Reasonable and necessary health care for a compensable injury, with no dollar cap and no duration cap under the Texas Act, subject to the treatment guidelines and utilization review the system applies.

How disputes get resolved

Division of Workers' Compensation

The division of the Texas Department of Insurance that administers the Act, resolves disputes, and enforces compliance. Usually shortened to DWC.

First Report of Injury

The employer's report of an injury to its carrier, due within eight days of the employer knowing of an injury that produces more than one day of lost time or an occupational disease. Late reporting is one of the few purely self inflicted problems in the system.

Notice of Injury

The employee's obligation to tell the employer, generally within thirty days of the injury or of knowing the injury was work related. Failure without good cause can bar the claim.

One Year Claim Filing Deadline

The worker's deadline to file a claim with the Division, one year from the date of injury, or from the date the worker knew or should have known an occupational disease was work related.

Benefit Review Conference

The first, informal step in the dispute process. A benefit review officer mediates and tries to settle the disputed issues without a hearing.

Contested Case Hearing

A formal evidentiary hearing before an administrative law judge when a benefit review conference does not resolve the dispute. Testimony is taken and a written decision issues.

Appeals Panel

The Division panel that reviews a contested case hearing decision on the written record. Judicial review in state district court follows if the dispute continues.

Subrogation

The carrier's right to recover what it paid from a third party whose negligence caused the injury. Preserving it is one of your duties under Part Four, which is why voluntary payments and settlements made without the carrier are a problem.

Waiver of Subrogation

An endorsement giving up that recovery right against a specified party, commonly required by contract. It is granted by endorsement for identified entities and is not automatic.

Safety, prevention and return to work

Accident Prevention Services

Loss control services a Texas carrier must make available to policyholders at no additional charge under the Labor Code. On request the carrier must respond within fifteen days, or sixty days where a site survey is needed. Most employers never ask, which means most employers pay for a service they never use.

Return to Work Program

A structured process for bringing injured workers back to productive duty, often modified, as soon as it is medically appropriate. Because the experience modifier weights claim frequency and indemnity duration heavily, a working return to work program is one of the few levers an employer directly controls.

Return to Work Reimbursement Program

A Texas program reimbursing eligible employers for workplace modifications that let an injured employee return, up to five thousand dollars per employer per appropriation year. Only subscribers are eligible, which is one of the quieter costs of opting out.

Bona Fide Offer of Employment

A written offer of a specific position within the worker's medical restrictions, meeting statutory content requirements. A valid offer affects the calculation of income benefits, and a defective one does not.

Light Duty or Modified Duty

Temporarily adjusted work within a treating doctor's restrictions. It is the practical mechanism behind a return to work program, and it needs a written job description to hold up.

Choosing not to subscribe

Subscriber

A Texas employer that carries workers compensation insurance. In exchange, the employer receives the exclusive remedy, meaning statutory benefits are generally the employee's only avenue against the employer for a work injury.

Exclusive Remedy

The bargain at the centre of the system. The worker gets benefits without proving fault, and gives up the right to sue the employer in tort. The employer accepts certain, no fault costs and gives up the chance of paying nothing.

Nonsubscriber

A Texas employer that has elected not to carry workers compensation insurance. Texas is the only state where this is broadly permitted for private employers. A nonsubscriber does not thereby avoid liability. It exchanges a defined, insured obligation for an undefined, uninsured one.

DWC Form-005

The annual notice a nonsubscriber files with the Division to report that it does not have coverage. Filing is required within the designated period each year.

Employee Notice Requirements

A nonsubscriber must tell employees in writing that it does not carry workers compensation, at hire and by posted notice. These are ongoing obligations, not one time paperwork.

The Three Defenses Removed

Section 406.033(a) of the Labor Code removes exactly three common law defenses from a nonsubscriber sued by an employee: that the employee was contributorily negligent, that the employee assumed the risk, and that the injury was caused by the negligence of a fellow employee. It removes three. It does not remove all of them, and it does not create liability by itself.

The Employee Still Has to Prove Negligence

Losing those three defenses does not make a nonsubscriber automatically liable. The employee still bears the full burden of proving that the employer was negligent and that the negligence caused the injury. A nonsubscriber that was not negligent can and does win.

No Comparative Responsibility Reduction

Because contributory negligence is unavailable, a nonsubscriber gets no jury question reducing damages by the employee's share of fault. In Kroger Co. v. Keng, 23 S.W.3d 347 (Tex. 2000), the Texas Supreme Court confirmed the point: an employee a jury would consider ninety percent at fault still recovers one hundred percent of proven damages. This, rather than any statutory penalty, is the financial heart of the nonsubscriber decision.

Responsible Third Party Designation

A procedural mechanism letting a defendant point the jury at a non-party who shares responsibility. In In re East Texas Medical Center Athens, No. 23-1039 (Tex. Apr. 25, 2025), the Texas Supreme Court held that nonsubscribers may designate responsible third parties under the proportionate responsibility chapter. It is a genuine win for nonsubscribers and is included here because a glossary that only listed the bad news would not be accurate.

Exemplary Damages Cap

Compensatory damages against a nonsubscriber are not capped. Exemplary, or punitive, damages generally are, under section 41.008(b) of the Civil Practice and Remedies Code. Describing nonsubscriber exposure as simply "unlimited" is imprecise, and the distinction between the two categories is where the real number lives.

Gross Negligence Death Claims

Even a subscriber's exclusive remedy has a limit. Surviving spouses and heirs may pursue exemplary damages against a subscribing employer where a work related death resulted from gross negligence. Whether the statutory exemplary cap operates in such a case against the Texas Constitution's provision on death actions is genuinely unsettled, and anyone told otherwise is being told more than the law currently supports.

Occupational Accident Policy

A non-statutory benefit plan some nonsubscribers buy to pay medical and disability benefits after a work injury. It is not workers compensation, its limits are finite, and it does not provide the exclusive remedy. Read the schedule of benefits and the exclusions before treating it as equivalent.

Nonsubscriber Employer Liability Policy

Liability coverage bought to respond to the employee lawsuits a nonsubscriber remains exposed to. It is the piece most often missing from a nonsubscriber programme, because the occupational accident policy pays the injury and this one pays the lawsuit.

Post-Injury Arbitration Agreement

An agreement, common in nonsubscriber programmes, requiring work injury claims to go to arbitration rather than a jury. Enforceability turns on how the agreement was formed and communicated, which is a matter for counsel rather than for a broker.

Administrative Penalties

The Labor Code sets a general ceiling on administrative penalties for violations of the Act, subject to mitigating factors and a right to a hearing. It is a general maximum applicable to violations generally, not a published daily fine aimed at nonsubscribers, and it should not be described as one.

The words on your Information Page, in your premium audit and on the notice you are required to post