TYPES OF LAWS Flashcards
Types of Laws
Prior to Workers’ Compensation laws going into effect, an employee had to sue the employer and prove negligence to receive such benefits. The employer had three common law defenses to avoid paying claims:
Assumption of Risk – This defense placed all the risk on the employee as being responsible for knowing the work conditions prior to employment.
Fellow Servant Rule – Removed the employer’s negligence if a fellow employee contributed in any way to the loss.
Contributory Negligence – Used to argue that the employee was partially at fault and therefore was not eligible to recover benefits from the employer.
Once Workers’ Compensation laws became effective, all work related injuries and occupational diseases became the responsibility of the Employer. This insurance became the sole source of remedy and the employee no longer had the right to sue the employer for damages.
Compulsory vs. Elective
Compulsory – In jurisdictions where Workers’ Compensation benefits are mandated by state law, employers are required to provide Workers’ Compensation benefits to their employees—either via insurance or self-insurance. If the provisions of a policy do not comply with the state law, the insurer is required to provide all legally mandated benefits.
Elective – In jurisdictions where Workers’ Compensation benefits are not mandated by state law, employers have the choice to accept or reject state Workers’ Compensation laws. If an employer chooses to reject the Workers’ Compensation laws and an employee is injured, the employee may then file a claim or lawsuit against the employer for injuries; and the employer is denied the use of common law defenses, such as assumption of risk, contributory negligence, and negligence of a fellow employee.
While most Workers’ Compensation statutes compel employers to provide coverage, they also protect employers from being sued. If an employer provides Workers’ Compensation insurance in compliance with state law, its employees cannot sue it for workplace injuries.
If an employer violates state law by NOT providing Workers’ Compensation benefits, the Workers’ Compensation statute doesn’t protect the employer from lawsuits. Essentially, an employer doing business without providing Workers’ Compensation benefits is exposing itself to unlimited liability for workplace injuries PLUS the fines and penalties imposed by the state for violating the law.
Monopolistic vs. Competitive
Monopolistic States – Workers’ Compensation insurance is only available through a state fund.
Competitive States – Workers’ Compensation insurance is available through private insurers as well as any state fund that may exist.
workers comp.
Employment Conditions
Employment Covered
Because Workers’ Compensation insurance responds to workplace injuries, it only provides coverage if an employment relationship exists between the employer and the injured person. An employer-employee relationship exists if the employer:
Retains the right to direct the way work shall be completed
Supplies the necessary equipment and tools to complete the work
Determines the work hours
Determines the end results of the work to be completed
Controls the frequency and timing of compensation for work
Another class of workers commonly employed are independent contractors. In most states, employers are not required to cover independent contractors over whom the employer does not retain the rights to control them, is not required to withhold taxes from any compensation, and who commonly work for multiple employers. Agents need to refer to their state’s Workers’ Compensation Law to determine how their state defines an independent contractor. For example, many state laws consider independent contractors who work solely for one employer and in the same trade to be statutory employees.work
Exempt Workers
Workers’ Compensation statutes require employers to provide benefits to all employees unless an employee is exempt. Some states exempt workers of employers with fewer than 1-3 employees.
However, some states exempt workers based on job duties. Examples include:
Agricultural workers, such as farm and ranch laborers
Domestic employees
Casual laborers – Those whose work is non-recurring or irregular
Independent Contractors – Plumbers, electricians, and landscapers who work under contract for more than one employer. The definition of independent contractor varies by state, as do requirements for Workers’ Compensation and exempt status.
Sole – Owners, Partners, and Corporate Officers
Covered Injuries
Covered injuries are those that arise out of, and in the course of, employment. This means:
The injury must occur while the employee is at work or working.
The employee is working the hours he/she is designated, or expected, to work.
The employee is performing the duties that he/she was employed to do.
The injury must arise from a risk that is reasonably related to employment.
Note: The employer can deny benefits to an employee who intentionally injures himself/herself or if the injury results from intoxication.
Occupational Disease
An occupational disease must arise out of the course of employment and be caused by conditions that are particular to that employment.
Example: An employee who contracts a cold in the winter may not be eligible for benefits because the cold could have been contracted while the employee was not working. However, a coal miner who develops respiratory problems will likely be eligible for benefits.
Federal Workers’ Compensation Laws
In addition to state Workers’ Compensation programs, federal laws governing certain types of employees:
The Federal Employers Liability Act (FELA) applies to interstate railroad workers
The U.S. Longshoremen and Harbor Workers’ Compensation Act applies to workers who load, unload, build, or repair ships (but not to the crew of the ship)
The Jones Act or Merchant Marine Act of 1920 applies to sailors injured by the negligence of others
The Federal Employees Compensation Act applies to all U.S. civilian employees
Defense Base Act applies to workers on military bases outside the United States
Benefits Provided (Determined by State Law)
Each state determines benefit levels, benefit types, and definitions of disability. The following are common definitions:
Medical Benefits – Unlimited coverage for all necessary medical (including hospital) expenses related to the covered injury that occurred during the policy period.
Disability Income Benefits
Benefits are generally limited to the period of disability.
Temporary Total – An injury, from which an employee is expected to recover and return to work, but is unable to do any work while recovering. Benefits begin after a waiting period of several days. Retroactive benefits will be paid back to the initial date of disability if the disability lasts beyond a certain period. The benefit amount is a percentage of the employee’s average weekly wage, subject to minimum and maximum limits. In most states, it is 66 2/3%.
Permanent Total – An injury that prevents an employee from being able to do any work for the rest of his/her life. Benefits are subject to the same weekly benefit percentage and the same minimum and maximum limits as Temporary Total. In most states, benefits are paid for life.
Temporary Partial – An injury after which an employee is able to do some work, but is unable to earn his/her usual wage until full recovery. Benefits are usually calculated as a percentage of the difference in the wages.
Permanent Partial – An injury after which an employee is able to do some work, but will never fully recover. An employee can still earn a wage, but not as much as he/she would have earned if the injury had not occurred.
Scheduled Benefits – A schedule of benefits applies to specific permanent partial injuries, such as a dollar amount for the loss of an eye, or a hand. These benefits are usually paid in addition to other benefits.
Rehabilitation Benefits – Physical therapy and vocational training are utilized with the objective of returning the injured employee to work as soon as possible. These benefits are usually paid by the insurer; however, some states have established special state funds to pay for rehabilitation costs that are funded by taxes levied against insurers and self-insureds.
Death and Survivor Benefits (Funeral Expense Benefit) – A statutory maximum amount, varying from state to state, is provided as a burial allowance. Survivor income benefits are a percentage of the deceased worker’s wages and are also provided to the surviving spouse (and usually end at remarriage); and/or children (until age 18, and sometimes longer if a full-time student).
Second Injury Fund
The Second Injury Fund pays compensation on behalf of an employer to an employee who has already suffered a prior disabling injury, and now sustains a subsequent injury, and the combination of the two injuries creates a greater disability than the second injury would have created by itself.
The employer is responsible only for compensation that would have been paid had the second injury occurred without the existence of the prior injury, and the fund pays the difference.
This fund is designed to encourage employers to hire people with disabilities by limiting their liability for subsequent injuries. The second injury fund is usually funded by assessments against insurers and self-insurers, but may also be financed through general state revenues.
Workers’ Compensation and Employers Liability Insurance Policy
The employers liability section of the policy doesn’t pay for medical expenses incurred by the injured employee. In order for the policy to pay, the insured MUST be legally liable for injuries and damages sustained by an employee that are not addressed by Workers’ Compensation statute or that are sustained by third parties and/or dependents of the injured worker. Employers liability pays all sums for which the insured is legally obligated to pay:
For injuries to employees that arise out of employment, but claimed against the insured in a capacity other than as employer
For care and loss of services
For consequential injury to dependents of an injured worker
For damages claimed by a third party as a result of a worker’s injuries
The Workers’ Compensation policy, like other policies, contains various parts that address coverages and conditions. The standard NCCI policy is only 6 pages because the details regarding payment of benefits are contained in each state’s Workers’ Compensation act and statutes. The policy Workers’ Compensation contains the following parts:
General Section
Part One – Workers’ Compensation Insurance
Part Two – Employers Liability Insurance
Part Three – Other States Insurance
Part Four – Your Duties if Injury Occurs
Part Five – Premium
Part Six – Conditions
General Section
The Policy – Establishes that the policy is a contract between the employer and the insurer. The terms of the policy may not be changed or waived, except by endorsement.
Who is Insured – Establishes that the employer is the insured.
Workers’ Compensation Law – The law of each state or territory named in the Information Page.
State – Any state in the United States, including the District of Columbia. An injured employee is entitled to benefits provided by the state where the injury occurs.
Locations – All workplaces, locations, and states listed in the Information Page.
Part One – Workers’ Compensation Insurance
How This Insurance Applies – This insurance applies to bodily injury by accident, bodily injury by disease, or bodily injury resulting in death.
The accident must occur during the policy period
The bodily injury must be caused or aggravated by the conditions of employment
The Insurer Will Pay – The insurer will promptly pay the benefits due.
The Insurer Will Defend – The insurer will defend any claim for benefits payable by this insurance. The insurer reserves the right to investigate and settle claims.
The Insurer Will Also Pay – The following amounts, in addition to other amounts payable:
Expenses incurred by the insured, at the request of the insurer, but not loss of earnings
Premiums for appeal bonds
Litigation costs taxed against the insured
Interest on a judgment against the insured
Expenses incurred by the insurer
Other Insurance – The insurer will not pay more than its share of the benefits and costs covered by the policy.
Payment the Insured Must Make (This is the exclusion section of the policy) – The insured is responsible for paying benefits in excess of those provided by the Workers’ Compensation law, including those required because of the:
Insured’s serious or willful misconduct
Insured knowingly employing an employee in violation of law
Insured failing to comply with health or safety laws
Insured firing, coercing, or otherwise discriminating against any employee
Note
If the insurer makes any excess payments, the insured must promptly reimburse the insurer.
Recovery From Others (Subrogation) – The insurer reserves the right to recover its payments from anyone liable for causing injury.
Statutory Provisions – The following apply as required by law
Notice of an injury must be given promptly
Bankruptcy of the insured does not relieve the insurer of its duties under the policy
The insurer is liable to any person entitled to benefits under the policy
Under the Workers’ Compensation law of the applicable state(s), jurisdiction over the insurer is jurisdiction over the insured
The policy will conform to Workers’ Compensation laws that apply to benefits and assessments payable under the policy, such as taxes, special funds, etc.
Terms of this policy that conflict with state law are automatically changed to conform
