3.3 North Carolina Workers' Compensation Insurance

Mandatory Coverage Under NCGS Chapter 97

The North Carolina Workers' Compensation Act (General Statutes Chapter 97) requires coverage for nearly every employer that regularly employs three or more employees, whether full- or part-time. This 3-employee trigger is lower than many states and is a heavily tested fact.

Who Must Be Covered

Corporate officers and LLC members count toward the 3-employee total but may elect out in writing for themselves.

Penalties for Non-Compliance

North Carolina treats failure to carry required coverage seriously:

• Knowingly and intentionally failing to insure is a felony; negligent failure is a misdemeanor.
• Civil penalty up to $100 per day of noncompliance (no statutory cap on the aggregate, subject to Commission discretion).
• An officer who willfully fails to secure coverage can be held personally liable for benefits.
• The Industrial Commission may issue penalties and pursue collection.

Exam Tip: The threshold is 3 or more employees; the radiation exposure exception drops it to 1. Agricultural exemption is fewer than 10 full-time workers.

The North Carolina Industrial Commission

The NC Industrial Commission (IC) — not the Department of Insurance and not the Department of Labor — administers the workers' compensation system.

Industrial Commission Functions

The Claims and Appeals Path

1. Report the injury — the employee notifies the employer in writing within 30 days (Form 18); the claim must generally be filed with the IC within 2 years of the accident.
2. Employer/insurer response — admits or denies on the appropriate IC form (Form 60 admit, Form 61 deny).
3. Mediation — most disputed claims go to mandatory mediation.
4. Deputy Commissioner hearing — an evidentiary hearing produces an Opinion and Award.
5. Full Commission review — a three-member panel reviews the record.
6. NC Court of Appeals, then the NC Supreme Court — judicial review on questions of law.

Obtaining Coverage

Exam Tip: An employer that cannot find voluntary coverage uses the assigned risk plan — the workers' comp counterpart to the auto Reinsurance Facility concept. Self-insurance always requires Industrial Commission approval.

Benefits and the Exclusive Remedy

Benefit Types

Compensation Rate and Caps (2026)

Worked example: an injured worker earning a $1,200 AWW is entitled to 66 2/3% = $800 per week in TTD. A high earner with a $2,400 AWW would compute to $1,600, but the 2026 cap limits the check to $1,446 per week.

Waiting Period

• Income benefits have a 7-day waiting period — no wage-replacement for the first 7 days of lost time.
• If disability exceeds 21 days, the first 7 days are paid retroactively.
• Medical benefits are never subject to the waiting period and start immediately.

Exam Tip: Memorize the 7-day / 21-day pairing. Seven days are unpaid up front; cross the 21-day mark and those seven days come back to the worker.

Exclusive Remedy and Its Exceptions

Workers' compensation is the employee's exclusive remedy against the employer: in exchange for swift, no-fault benefits, the worker gives up the right to sue the employer for negligence, and the employer is immune from tort liability.

Exceptions

• Woodson / intentional-tort claims — where the employer engaged in conduct substantially certain to cause serious injury, the worker may sue in tort.
• Third-party claims — the worker may sue a negligent non-employer (e.g., a defective-equipment manufacturer); the comp carrier then holds a subrogation lien on any recovery.
• Failure to carry coverage — an uninsured employer loses immunity and may be sued directly while also facing penalties.

Rate Regulation: NC Rate Bureau

The North Carolina Rate Bureau develops workers' comp loss costs and classifications, filing them with NCDOI. Premiums are built from payroll by class code, then adjusted by an experience modification factor that compares an employer's actual losses to expected losses — a mod below 1.0 (good experience) lowers premium, while a mod above 1.0 raises it.