Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 1 minute
Key Takeaways
- Workers’ compensation coverage varies; some injuries may not be covered, especially if related to intoxication or self-harm.
- Be aware of the ‘going and coming’ rule; injuries during commutes or outside work hours can be complex for claims.
- Mental stress claims may not qualify for coverage without extraordinary circumstances; state laws differ significantly.
- Denials can result from misunderstandings; maintain clear health records and policies to avoid issues with claims.
- Understanding what constitutes a compensable injury can help in reducing claims denial and improving employee care.
Workers’ compensation is a policy type that most business owners don’t think about very often. That is, until someone gets hurt on the job. The moment that you need your workers’ compensation insurance, you are glad that you have it.
But what if the accident that happened isn’t covered? How can you know what what is and isn’t covered by workers’ comp insurance?
In a frequently cited study of Minnesota workers’ comp back‑injury claims (injuries from 1985–1989), the median indemnity payment was $1,273 for denied‑but‑uncontested cases and $14,000 for denied‑and‑contested cases. Disputes can materially increase costs, but modern outcomes vary by state, injury type, and benefit levels.
Understanding what your workers comp policy may or may not cover is strategic. Let’s take a look at some common situations that may happen in real life.
1. Injuries That Happen to Intoxicated Employees
Let’s take a look at a common scenario. A worker is stocking shelves and falls from a ladder due to being drunk. You file the claim, and it is denied.
Many states allow an intoxication defense, but it is not automatic, the policy holder often must show the impairment caused or materially contributed to the injury under that state’s standard. Testing practices also must follow applicable state rules and privacy/employment requirements.
Tip: Make sure that your workers are clear about your drug and alcohol policy, and perform post-incident testing and document the results.
Statistic: BLS reported 525 workplace overdose fatalities in 2022, up 13.1% from 2021. And for 2023 totals, NSC reports 512 workplace overdose deaths.
2. Self-Inflicted Accidents and Injuries
While it seems unlikely, there are people who hate their job so much that they might actually be willing to hurt themselves in order to be allowed to leave work for the day. Hands slamming in drawers and doors, cutting fingers with knives, and other injuries that are self-inflicted fall into another category of work-based injury.
Workers’ compensation coverage is for accidents and not intentional harm. An injury that is proven to be self-inflicted may not be covered.
Tip: Make sure that staff report stress and mental health concerns well before they escalate to the point that job safety or self-harm are in play.
3. Parking Lot / Ingress‑Egress Rule
Scenario: Many states apply a ‘going and coming’ rule that generally excludes ordinary commutes. However, exceptions are common, including injuries occurring during reasonable ingress/egress on employer‑controlled premises (such as a company‑owned or maintained parking area), employer‑provided transportation, special errands, or travel‑status roles.
Statistic: Accidents that take place during commutes to and from work have increased by almost 49% over the past six years.
4. Off-Duty or Unauthorized Activities
If an employee is on-site off the clock, compensability is fact‑specific. If they are performing work for the employer’s benefit (even if unauthorized) or are injured during reasonable ingress/egress on the premises, coverage may apply in some states.
Tip: Don’t allow staff to remain on-site after their shift is done. If workers are not on the clock, they should not be on the property.
5. Horseplay
Horseplay claims are highly state‑specific. Often, an innocent bystander injured by others’ horseplay may still be covered, while instigators/active participants face higher denial risk (with exceptions in some jurisdictions).
Tip: Make it clear during training and hiring processes that your business is not going to tolerate this kind of behavior on-site.
6. Running Errands During Work Hours
It is often tempting for employees to just swing by the grocery store or go take care of an errand while they are on the clock. This is a common temptation to those who work jobs where they have a company vehicle and they drive around for business purposes all day. These claims may get denied when the activity that led to the injury wasn’t a work-based activity.
When employees leave the prescribed actions that are part of their work duties behind to do other activities and are hurt, workers’ compensation doesn’t apply.
Tip: Be sure that your staff understands what they are allowed to do with their free time during breaks and while they are on the clock.
7. Workplace Violence
Let’s say that you own a grocery store. Two of your cashiers get into a physical altercation, and one of them gets hurt. This claim is denied.
The person who incited the violence may never be covered under your policy. The person who was harmed by being attacked may have coverage under your policy.
Tip: De-escalation training and clarity about workplace behavior during training and onboarding can go a long way toward promoting a workplace where people go to management when they are upset rather than talking with their fists.
8. Mental/Stress-Related Claims Without Injuries
Unfortunately, customer service jobs can take a real toll on people’s mental health and well-being. Any job could be stressful, but that does not automatically mean that there is workers’ comp coverage for mental health issues.
Coverage for psychological injuries varies widely by state and claim type (physical‑mental vs. mental‑mental) and often requires ‘extraordinary’ stress or specific qualifying events. Many states provide some path to coverage in at least limited circumstances, and legislative changes continue to expand or refine eligibility.
9. Aggravation of Pre-Existing Health Conditions
Let’s look at another common issue. A warehouse worker has a history of back injury when they are hired. They are hurt on the job and claim it’s a new injury. Medical examination shows that the pain they are suffering is related to their existing injury.
Injuries that are the re-aggravation of previous conditions that were present when someone takes a new job cannot be claimed as new injuries on the job. Documentation is key, and companies should ask about pre-existing injuries that workers might have when they are hired.
Tip: Make sure to maintain clear pre-employment health records and incident records related to all your employees.
10. Sub Contractors and Uninsured Contractors
sub contractors typically need to have their own coverage, but employer obligations could expand if a worker is misclassified or if a subcontractor is uninsured. In many states, hiring contractors may be liable for injuries to an uninsured subcontractor’s.
Tip: Request Certificates of Insurance (COIs) from all your subs and contract workers.
Things to Remember About Coverage on a Workers’ Comp Policy:
1. You cannot assume that coverage for all kinds of injuries for all kinds of workers is extended by your workers’ comp policy.
2. Denied claims can be linked with substance use, misconduct, and off-duty actions.
3. Prompt reporting and testing are important to any business process surrounding accidents on the job.
4. You should update job descriptions on a routine basis.
5. Make sure that you verify the classification of your workers and contractors well before work begins.
Why Does All of This Matter?
Denied claims are the bane of any business owner’s experience with workers’ comp coverage. Denials can increase your premiums just like an increased number of claims, and can make it very difficult to take care of your employees properly. Denials are often related to misunderstandings, but as a business owner, if you are clear about the things that are suitable for workers’ comp claims, you may be much less likely to fall into this kind of situation.
We have seen every kind of workers’ comp claim denial there is. We understand that getting access to quality policies matters, and we can also help you to be clear about what is covered under your policy and what is not. Reach out to us today for a quote and find out how we can help you to protect your business and your employees the smart way.
