Workers' compensation insurance 10% Flashcards
Workers’ comp covers…
work-related injuries and protects employers from their liability when injury occurs
Workers’ comp
Covers an employee’s medical bills and lost wages following a work-related injury
Workers’ comp is purchased by
the employer
Is workers’ comp primary or secondary coverage?
Primary coverage, pays before other policies
Workers comp is an exclusive remedy meaning
keeps employee from suing employer for covered injuries
Worker’s comp is a no fault policy
applies no matter who is at fault for the injury
Workers’ compensation benefits are
state specific
Most states require WC, but not all.
Monopolistic:
the state provides WC
Competitive:
the state has a fund that runs in direct competition with private insurers, and employers choose which they prefer
Is Michigan Monopolistic or competitive?
Competitive State
Compulsory:
workers’ comp coverage is required by law for all employers and employees
Elective:
both employers and employees may choose not to be covered under workers’ compensation
Workers’ Compensation in Michigan is governed by the
Workers’ Disability Compensation Act (Chapter418)
In Michigan, as in most states, workers’ compensation is
Compulsory
The following people do not count as employees, and so do not need WC insurance:
● House hold domestic servants who:
○ are related to the employer
○ worked less than 35 hours/ week for 13 weeks or more in the past year
● Foreign nationals working under the Mutual Educational and Cultural Exchange Act
● People who are self-employed
● Independent contractors
● Named partners (or their relatives) excluded by endorsement
The following employers must have WC insurance:
● All public employers
● Private employers with at least 3 regular employees (orfewerthan3, if any of
them have clocked at least 35 hours/ week for at least 13 weeks in the past
year)
● Agricultural employers who have at least:
○ 3 regular employees who worked for at least 35 hours/ week for at least
13 consecutive weeks in the past year (coverage only applies to these employees)
○ 1 employee who worked for at least 35hours/week for 5weeks in a row
(only medical and hospital coverage is required)
○ note: family members who live at the agricultural employer’s premises do not count as employees
Covered injuries:
● Take place at work (or somewhere the employee must be for work)
● Arise out of, and in the course of, employment
● Limit the employee’s “wage earning capacity”
Covered injuries can include:
● Mental disabilities caused by actual events of employment (not unfounded perceptions)
● Age-related conditions (e.g. arthritis or heart/ cardiovascular conditions) if the
employment significantly aggravates or accelerates them
● Occupational diseases
Does not include injuries that are:
● Caused by intentional and willful misconduct
● The result of social or recreational off-duty activities
Occupational diseases
● Arise out of a risk inherent to a specific job
● Employee can receive benefits if the employment:
○ significantly contributed to the disease or its development
○ exposed the worker to a greater risk of contracting the disease
General damages for pain and suffering, and punitive damages for employer negligence, are usually
not available in workers’ compensation
plans
Workers’ comp policy structure
- Employee benefits
a. wage loss benefits
b. medical benefits
c. death benefits - Employer’s liability
- Other states insurance
- Your duties if injury occurs
- Premiums
- Conditions
Part One: Workers’ Compensation
Employee Benefits
Employee Benefits (3 parts)
- wage loss benefits
- medical benefits
- death benefits
wage loss benefits
These pay the employee a portion
of the wages lost as the result of a work-related injury.
three kinds of wage loss benefits:
● Total Disability
● Partial Disability
● Permanent Total Disability
Average weekly wage (AWW)
An employee’s average income in the highest paid 39 weeks of the 52 weeks leading
up to the injury or illness
Waiting period
Income benefits are paid starting on the eighth day after the injury takes place. Then, if the disability lasts for 2 weeks or more, the first 7 days will also be covered
Total disability benefits
● For employees who can not do any regular work because of injury
● Pays 80% of pre-injury AWW(up to the state maximum)as long as the
disability lasts
Partial disability benefits
● For employees who cannot make as much money as they could before their
injuries
● Pays 80% of the difference between the employee’s pre-injury and post-injury
AWW (up to the state maximum) as long as the disability lasts
Permanent Total disability
● Pays 80% of pre-injury AWW (up to the state maximum) for 800 weeks, or longer if the worker is still completely disabled at that point
Specific Loss benefits
● Cases that involve the actual loss of a body part have a specified time limit for
benefits(listed below)
● Minimum benefit:25%of the state AWW
Minimum Benefits
Unlike the other wage loss benefits, permanent total disability and specific
loss benefits both have a minimum amount:
injured workers who qualify for
these benefits will get at least 25% of the state average weekly wage, if not
more
Second Injury Fund
provides benefits when an employee, who was already permanently injured by a previous accident, suffers a second specific loss that combines with the first one to leave the employee totally disabled.
For example… (secondary injury fund)
Say John lost his hand in an accident as a child. Years later, when he loses an eye in a work accident, he will qualify for total disability benefits because of the two injuries put together. His employer, however, will only be responsible for providing specific loss benefits for the loss of his one eye (162 weeks).
After that, the Second Injury Fund will step in to continue his disability benefits, for at least the remaining 638 weeks (800- 162 = 638), or longer if he remains totally disabled after reaching 800 weeks
Medical benefits
● Pay for all reasonable and necessary medical expenses due to a work-related
injury
● No overall dollar limit to medical benefits
● Covers doctor visits, surgeries, emergency room visits, hospital stays, x-rays,
medicine, crutches, dentures, hearing aids, and more
● Employer chooses the physician, but after 28 days of treatment, the employee
can choose a different doctor by notifying the employer and insurer
Death benefits
Benefits for a worker’s dependents if the worker dies from an injury or disease arising out of employment:
● 80% of the deceased employee’s AWW for 500 weeks
● After the 500-week period, if any wholly or partially dependent person is under 21 years old, a WC magistrate may decide to continue the benefits until she turns 21 (if the dependent was only partially dependent, the benefits will continue at an amount proportional to that dependence)
● Funeral and burial expenses up to $6,000
Employers’ liability coverage will not cover:
● Any liability that the employer takes on as part of a contract
● Any work that is in violation of the law, including damages caused by such
work, injuries to employees who knew they were acting illegally, and penalties
imposed for breaking the law
● Injuries that are caused intentionally or made worse by the insured
they are somewhere else temporarily)
● Injuries occurring outside the United States or Canada (except to citizens while
● Claims arising from unlawful discrimination, coercion, or discharge
● Obligations under any compensation law or federal act (such as the Longshore
and Harbor Workers’ act, the Jones act, etc.)
WC options 1. Buy workers’ compensation coverage from a
private insurer
WC Options 2. Buy workers’ compensation coverage from the
Michigan Workers’
Compensation Placement Facility
- ____-______ after receiving approval by the WC Agency bureau. Non-public
employers that want to self-insure might need to deposit and maintain some
kind of security with the state treasurer (a surety bond or a letter of credit)
Self-insure
- Obtain insurance through a ____-_______ _____ Under this option, 2 or more
public employers of the same type of unit, or multiple private employers which
operate the same kind of business and have at least $1,000,000 in combined
assets, can band together to obtain approval for self-insurance as a group
Self-insurer group
Part Three: Other States Insurance
Workers’ comp will cover employees who are injured in another state if:
● The employer is subject to Michigan WC Laws
● The employee is:
○ a resident of Michigan at the time of the injury or
○ working under a contract of hire made in Michigan
