20-Workers' Compensation Flashcards
What is worker’s’ compensation?
Workers’ compensation laws give employees the right to collect for injury, disability, or death that occurs in the course of employment.
• Assumption of risk found the employer to not be at fault because the employee knew the risk before employment and assumed all of the risk of injury.
•Contributory negligence was a rule of law that stated if there was any fault by the injured party, the injured party is considered to be totally at fault and cannot collect from the party being sued. If the employer could prove fault by the employee, the employer had no responsibility.
• The fellow servant rule stated that if the injury was caused by a fellow employee, the employer could not be found to be at fault.
Workers’ compensation laws today are no fault laws, and the employer has agreed to pay the costs of occupational injury or disease according to the benefits stated in the law. This cost to the employer is passed on to the consumer in the prices a business charges for its products and services. In return, the benefits stated in the workers’ compensation laws are the only benefits-called the exclusive remedy-available to employees. Employees cannot sue employers in court to obtain additional benefits.
Occupations covered and exemptions
Employers are not required to provide compensation benefits for exempted workers or employees.
Every state has some exempt occupation classifications, but the majority of the nation’s employees are covered under workers compensation laws. Although the exemptions are not the same in all states, the following classes of workers are typically exempt:
• Certain farm and agricultural groups workers
• Charitable organizations volunteers
• Domestic employees and casual laborers
• Commissioned real estate agents
Common Law Defenses and No Fault
Common Law Defenses and No Fault
• Assumption of risk
• Employee knew of job risks
• Employer not at fault
• Contributory negligence
• If employee partly at fault, considered to be totally at fault
• Employer not at fault
• rellow servant rule
• Injury caused by another employee
• Employer not at fault
• After states passed workers compensation laws-no fault
• Employer agrees to pay regardless of fault
• Benefits of the law are the employee’s exclusive remedy
Benefits Provided under worker compensation
In most states there are four workers’ compensation benefit categories:
Disability/loss of income benefitscompensate employees who are unable to work as the result of a work-related injury or disease. These benefits are intended to replace a portion of lost income, but not all of it.
Medical benefitspay for the cost of various types of medical services required because of an employment-related injury or disease. Payment for basic medical expenses are generally unlimited and do not contain deductibles.
Survivor/ death benefits compensate a surviving spouse, children, or other relatives of an employee whose death results from a work-related injury or disease. Survivor benefits include a weekly benefit and a stipulated amount for funeral and burial expenses.
Rehabilitation benefits include medical rehabilitation, such as physical therapy designed to improve physical functioning, and vocational rehabilitation, such as retraining for a different occupation.
Workers’ compensation rehabilitation benefits pay reasonably justifiable expenses for these purposes.
Compensable Injuries: Must happen while you are working
Three factors are used to determine if the injury arose in the course of employment: time, place, and circumstances.
• Time is important because a compensable injury must occur during the time work is being performed for the purposes of employment.
• Place and circumstances are important because the injury must either occur at the place of employment or occur away from the place of employment while employment duties are being performed.
Occupational disease is a medical condition caused by a specific type of employment. For example, workers in coal mines may develop a disease called black lung and, if this occurs, would be entitled to compensation.
Compulsory vs. Elective
In most states, the law is compulsory, meaning the employer must accept and comply with all provisions of the law.
If the state law is elective, the employer may choose not to be subject to the law. However, even in elective states, an employer who chooses not to provide workers’ compensation is unable to utilize the common law defenses we previously discussed, as these are no longer considered valid defenses for work-related injury claims. Therefore, if the injured employee can prove fault by the employer, it is now up to the courts to award benefits to the employee.
Even in elective states, however, there are certain occupations or groups for which workers’ compensation is compulsory, such as government employees
Compulsory or Elective summary
• Almost all states require employers to comply with the provisions of the law.
• In an elective state, the employer does not have to comply.
• Can be sued
• Cannot claim common law defenses
• Assumption of risk
Contributory negligence
• fellow servant
FUNDING
There are five basic methods for funding these benefits. Compulsory states require that employers provide coverage through at least one of these methods.
• Workers’ compensation insurance is issued by private insurers. The employer transfers compensation obligations to the insurance company and the required benefits will be paid from the policy. Even though the employer has transferred the risk of loss to an insurer, it is the law that determines the benefits payable.
• Monopolistic state funds require employers to purchase workers’ compensation insurance from the state. Private insurance companies are not allowed to compete against these funds.
• Competitive state funds give employers a choice between purchasing workers’ compensation insurance from a state fund or a private insurance company. Thus, the state fund competes with
private insurance.
• Some employers assume their own workers’ compensation exposure through self-insurance. If this method is chosen, the employer will set up a fund to pay workers compensation claims and file evidence of its existence with the state workers’ compensation authority. The employer pays benefit costs and claim expenses, as well as medical and legal services, or may contract with a third party (called a third party administrator) to handle the processing of the claims. If the employer chooses a third party for claims handling, the employer is still responsible for providing the funds necessary to pay the claims.
• Many states allow employers to form groups to insure the group members’ workers’ compensation exposure in a particular state. Eligibility requirements vary from state to state. For example, in some states, the group members must be involved in the same type of business; in others, the members must have a minimum amount of workers’ compensation premium.
FUNDING summary
Funding of Benefits
• Private workers compensation insurance policy
• Monopolistic–insurance bought from the state
• Competitive-insurance bought privately or from the state
• Self-insurance-employer has savings to pay claims
• Groups involved in same business
Coverages for Workers Compensation
General Section
• Part One–Workers’ Compensation Insurance
• Part Two–Employers Liability
• Part Three- Other States Insurance
• Part Four- Your Duties if Injury Occurs
• Part Five-Premium
• Part Six–Conditions
The General Section contains definitions and conditions that apply to the policy as a whole.
What are the coverages for WC
Part One–Workers’ Compensation Insurance promises to pay all compensation and other benefits required of the insured by the workers’ compensation law in the state or states where the insured’s business operates (which are listed in the information page). No dollar limit applies, except for those that are a part of the law. Coverage applies to any work-related accident or illness occurring during the policy period.
Part Two-Employers Liability provides coverage to the insured for sums the insured becomes legally obligated to pay under common law because of a work-related injury or occupational disease. Three separate limits apply:
• Bodily injury by accident–each accident–the most an insurer will pay for all claims arising out of any one accident, regardless of the number of employees.
•Bodily injury by disease–policy limit-the most an insurer will pay for employee bodily injury
by disease claims in one policy period, regardless of the number of employee claims.
• Bodily injury by disease-each employee–the most an insurer will pay for damages due to bodily
iniury by disease to anv one emplovee.
Employers liability is needed because there are situations that are not covered by workers’ compensation laws, such as exempt employments, illegal employments, and noncompensable injuries.
An emplovee who is unable to collect workers compensation under state law may still sue the emplover for damages and the employer would be covered by this section of the policy.
Part Three-Other States is used to provide coverage for states that are not specifically listed in the
information page for Part One coverage. Each state to be covered must be listed and the insured must
provide notice to the insurer as soon as work begins in a new state.
Part Four -Your Duties if Injury Occurs addresses the insured’s obligations when an injury occurs for which there may be coverage. The insured must provide medical services required for the inured party, report the injury to the insurer, and cooperate with the insurer in the investigation and settlement of the claim.
Part Five-Premium explains how the cost of the policy is determined.
Part Six-Conditions sets forth the conditions that apply to the policy, such as cancellation procedures, subrogation, and the insurer’s right to inspect the insured’s workplace.
Exclusions
Part One-Workers’ Compensation benefits are established by law. So there are few, if any, exclusions in Part One. The following exclusions apply to
Part Two-Employers Liability:
• Liability assumed under contract
• Punitive damages awarded because a worker was employed in violation of the law
• Injury to a worker while employed in violation of the law with the insured’s knowledge
• Obligations imposed by any workers’ compensation, occupational disease, unemployment compensation, or disability benefits law
• Injury intentionally caused or aggravated by the insured
• Injury that occurs outside the United States, its territories or possessions, or Canada (does not apply to residents of these areas who are temporarily outside these areas)
• Damages arising out of violations of employment practices laws, such as discrimination or
harassment
• Injury that is covered under a federal workers’ compensation law
• Injury to the master or member of the crew of any vessel
Fines and penalties imposed for violations of federal or state law
Exclusions Part Two
Exclusions Applicable to Part Two-Employers Liability
• Liability assumed under contract
• Punitive damages awarded because a worker was employed in violation of the law
• Injury to a worker while employed in violation of the law with the insured’s knowledge
• Obligations imposed by any workers compensation, occupational disease, unemployment compensation, or disability benefits law
• Injury intentionally caused or aggravated by the insured
• Injury that occurs outside the United States, its territories or possessions, or Canada does not apply to residents of these areas who are temporarily outside these areas
• Damages arising out of violations of employment practices laws,
such as discrimination or
barrassment
• Injury that is covered under a federal workers compensation law
• Injury to the master or member of the crew of any vessel
• Fines and penalties imposed for violations of federal or state law
Endorsements
Coverage for certain types of benefits or certain classes of employees may only be provided by
encorsemena
Some types of workers are not covered under a state’s workers’ compensation laws, such as domestic employees and farm workers. An employer can provide coverage for excluded/exempt workers by adding the voluntary compensation endorsement to the policy.
Voluntary Compensation Endorsement
• Covers exempt employees not covered by the state workers’ compensation law
PREMIUM COMPUTION
For each job classification, the manual provides a rate per $100 of annual payroll. The rate for the rate class of each employee is multiplied by each $100 of annual payroll applicable to the class. Rates for each class are totaled, and a premium discount that varies with the amount of total premium Is applied.
A deposit premium is collected at the beginning of the policy period based on the estimated payroll.
At the end of the policy period, a payroll audit will be conducted to determine the final premium for the policy period.
The actual loss experience of a business is taken into consideration, and a modification factor is used to make an adjustment to the manual premium. This is called experience rating. The rate is calculated on audited payroll by class code, 3 years or 45 months of prior loss data, and established rates. The rating factor measures the frequency and severity of losses, rewarding businesses with good safety practices and penalizing those with more frequent losses by charging higher premiums.
