Workers’ Compensation

Overview

Under Workers’ compensation laws, benefits must be paid for on- the- job injuries, regardless of negligence on anyone’s part. This means that even if the employee is injured through their own negligence, they are entitled to benefits, and can’t sue their employer.

In addition to providing for payments of benefits to employees as prescribed by law, Workers’ Compensation policies provide Employers Liability Coverage to the employer for employees’ bodily injury claims that don’t fall within the scope of Workers’ Compensation laws.

Glossary

Workers Compensation Employers Liability Policy Insurance that covers an employer’s obligation under Workers Compensation laws, which make the employer responsible for stated damages in the event of a work –related injury or illness. Also covers the insured’s liability for work-related injuries under common law.

Workers Compensation Laws: Gives employees the right to collect from their employers for injury, disability or death that occurs in the course of employment.

Assumption of Risk: Allows the employer to deny liability on the basis that the employee knew what the situation was like before they were employed, and therefore, assumed all the risk of injury themselves.

Contributory Negligence: Used to deny liability on the basis that, no matter how negligent the employer was, the employee had also been negligent, and therefore the employee should be responsible for the consequences.

Fellow Servant Rule: Used to deny liability on the basis that the injury was caused by a fellow employee and, therefore, the employer can’t be held liable.

Types of Laws

Compulsory versus Elective

1. Compulsory – Employers are required by law to provide Workers’ Compensation benefits to their employees with insurance, or show the ability to provide required benefits. (Most states are compulsory)
   Note: If the provisions of the policy don’t comply with the state law, the insurer is required to provide all legally mandated benefits.
2. Elective – 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 bring a suit against the employer and the employer is denied the use of common law defenses, such as assumption of risk, contributory negligence, and negligence of a fellow employee.

Monopolistic versus Competitive

1. Monopolistic – Workers’ Compensation insurance is only available through a state fund.
2. Competitive – Workers’ Compensation insurance is available through private insurers.

Exclusive Remedy

The process by which the employer assumes absolute liability for injuries to the employee. Under Workers’ Compensation, if the employee is injured, the employee may not:

1. Collect benefits from the employer or the employer’s insurance company and then sue the employer for negligence or liability.
2. Refuse to accept compensation benefits in order to sue the employer for a larger award.

Employment Covered

1. The types of employees covered under Workers’ Compensation vary from state to state. Since Workers’ Compensation is a relationship between the employee and the employer, Workers’ Compensation insurance is a relationship may be required if the employer:
   1. Retains the right to direct the way work shall be completed.
   2. Supplies the necessary equipment and tools to complete the work.
   3. Determines the work hours.
   4. Determines the end result of the work to be completed.
   5. Controls the frequency and timing of compensation for work.
2. Although most states have Workers’ Compensation requirements, certain employments may be exempt or excluded. The following are some examples:
   1. States where Workers’ Compensation laws only apply to jobs that are deemed hazardous or dangerous.
   2. Employments specifically excluded by law. These usually include:
      1. Farm Laborer –
      2. Domestic Servants – Such as a maid or butler.
      3. Casual Workers – Those whose work is nonrecurring or irregular. (This doesn’t include part time employees.
      4. Independent Contractors
3. Even though certain employments are exempt pr excluded, the employer may provide Workers’ Compensation Insurance on a voluntary basis.

Covered Injuries

Covered injuries are those that arise out of, and in the course of, employment. This means:

1. The injury must occur while the employee is at work or working.
2. The employee is working the hours they are designated, or expected, to work.
3. The employee is performing the duties that they were employed to do.
4. 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 themselves or if injury results from intoxication.

Occupational Disease

An occupational disease must arise out of the employment and must be caused by conditions that are particular to that employment.
Example: An employee who catches a cold in the winter might not be eligible for benefits because the cold could’ve been caught while the employee wasn’t working. However, a coal miner who develops respiratory problems may likely be eligible for benefits.

Benefits Provided (Determined by State Law)

1. Medical Benefits – Most states provide unlimited coverage for all necessary medical (including hospital) expenses related to the covered injury that occurred during the policy period.
2. Disability Income Benefits
   1. Temporary Total: An injury, from which an employee is expected to recover and return to work, but is unable to work while recovering. Benefits begin after a waiting period of several days. Retroactive benefits will later be paid, back to the initial date of disability, if the disability last 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 this amount is 66 2/3%.
   2. Permanent Total – An injury that prevents an employee from being able to do any work for the rest of their life. Benefits are subject to the same weekly benefit percentage and the same minimum & maximum limits as Temporary Total. In most states, benefits are paid for life.
   3. Temporary Partial – An injury with which an employee is able to do some work, but isn’t able to their usual wage until full recovery. Benefits are usually calculated as a percentage of the difference in the wages.
   4. Permanent Partial – An injury with which an employee is able to do some work, but will never fully recover. An employee can still earn a wage, but not as munch as they would’ve earned if the injury wouldn’t have occurred.
   5. Scheduled Injuries – A schedule of benefits that applies for specific permanent partial injuries, such as a specific amount for the loss of an eye, or a specific amount for the loss of a hand. These benefits are usually paid in addition to other income benefits.
      Note: Benefits are generally limited to the period of disability.
3. Rehabilitation Benefits – Physical therapy and vocational training are utilized with the objective of returning the injured employee back to work as soon as possible. These benefits are usually paid by the insurer; however, some states have set up 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 Benefits) – a statutory maximum amount, varying from state to state, is provided as a burial allowance. Survivor income benefits are percentage of the deceased workers’ wages and are also provided to the surviving spouse (ends with remarriage); and children under 18, or longer if in school.

Second Injury Fund

1. The Second Injury Fund pays compensation on behalf of 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’ve created by itself.
2. The employer is responsible only for that compensation that would’ve been paid had the second injury occurred without the existence of the prior injury, and the fund pays the difference.
3. This fund is designed to encourage employers to hire people with disabilities by limiting employers’ liability for subsequent injuries.
4. The second injury fund is usually funded by assessments against insurers and self insurers, but may also be financed through general state revenues.

Federal Workers’ Compensation Laws

In addition to state Workers’ Compensation programs, there are federal laws covering certain types of employees:

1. The Federal Employers Liability Act that applies to interstate railroad workers.
2. The U.S. Longshoremen and Harbor Workers’ Compensation Act that applies to workers who load, unload, build, or repair ships (but not to the crew of the ship).
3. The Jones Act that applies to the crews of ocean vessels.
4. The Federal Employees Compensation Act that applies to all U.S. civilian employees.

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