workers´ compensation
medical malpractice insurance
commercial general liability
performance bonds for contractors
automobile liability insurance for truckers.
By far the most common schemes involve unauthorized insurance – the sale of policies by companies not licensed in Texas. These often are offshore companies, chartered by Caribbean or Pacific island nations that cannot regulate them effectively. The companies may have impressive sounding names and authentic-looking policy forms.

If questioned about lacking a Texas license, unauthorized insurers might claim to be surplus lines companies. Call TDI´s Consumer Help Line to verify whether a company is an eligible surplus lines carrier and the agent is licensed to sell surplus lines policies.

Workers´ Compensation

Businesses without standard workers´ compensation insurance forfeit almost all their defenses against lawsuits and may face unlimited liability if sued by injured employees. Only the following are part of the workers´ compensation system:

Businesses with standard workers´ compensation policies issued by insurance companies licensed to write this type of coverage in Texas.
Large employers certified by the Texas Workers´ Compensation Commission to self-insure workers´ compensation benefits.
Political subdivisions - These may self-insure, buy their coverage from insurance companies licensed to write workers´ compensation or enter into interlocal agreements with other political subdivisions providing self-insurance for workers´ compensation.

Policies sold by unauthorized insurers and surplus lines companies are not workers´ compensation under Texas law. Some promoters have offered ERISA plans as cheap alternatives to workers´ compensation. Federal courts have held, however, that even valid, single-employer ERISA plans don´t qualify as workers´ compensation in Texas.

Some businesses use employee leasing companies to handle their payroll, paperwork, and insurance. If an employee leasing company does not have workers´ compensation coverage with an insurer licensed to write workers´ compensation in Texas, the company its clients can be sued by injured employees.

Other property and casualty lines - Fictitious or unlicensed offshore companies sometimes try to sell bogus medical malpractice, commercial general liability, contractors´ performance bonds, and trucker´s liability insurance. The big selling points are cheap premiums and lax underwriting standards. Policyholders run a tremendous risk that their claims – or liability claims against them – will not be paid.

Defenses Against Fraudulent Business Insurance

Stick with agents who have proven their reliability and honesty in the past.
Shop carefully for the insurance you need. If you belong to a trade association, seek its advice on insurance carriers.
Study the legitimate market´s normal price range for the coverage you want. If a quote is well below this range, be skeptical.
Ask questions about the company and the policy. Go elsewhere if the agent is evasive.
Verify that coverage actually exists. Don´t let the agent keep your premium while shopping around for a carrier.
Verify that an unfamiliar company or agent is licensed by calling TDI´s Consumer Help Line.
Consult your attorney and accountant before signing a business insurance contract.