Workers’ Compensation and Employers Liability Insurance Policy

Overview

Although insurers aren’t required to use a standard Workers’ Compensation policy form, many insurers use forms that are very similar to the standard form developed by the National Council on Compensation Insurance. The policy consists of the following parts:

Compulsory Insurance Law

1. Louisiana has a compulsory Workers’ Compensation law.
2. There is a penalty of $250 per employee up to $10,000 for failure to secure compensation.

Administration

1. The Workers’ Compensation program is administered by the Office of Workers’ Compensation Administration under the supervision of the Department of Labor.
2. Employees are required to keep records of job related accidents, disability claims.

Exemptions

1. Agricultural crew members or crop spraying airplanes.
2. Domestic workers earning less than certain levels of wages.
3. Real estate brokers and salespeople.
4. Independent contractors.
5. Public officials.
6. Uncompensated officers and board members of nonprofit organizations.

Louisiana Workers’ Compensation

1. Provides Workers’ Compensation coverage to employers who are unable to procure insurance in the normal markets.
2. The Corporation will offer a preferred risk policy program and an accepted risk program.
3. The Corporation will offer a preferred risk policy grogram and an accepted risk program.
4. The Corporation will also have a fraud division to take actions, remedy, and prevent fraudulent actions.

Information Page

This page serves as the policy’s Declaration Page, and contains the following information:

1. Name, Address, and Type of Business of the Insured.
2. Policy Period.
3. Policy Territory – Lists the states in which the insured currently does business, and also lists other states in which the insured may have a future exposure, excluding monopolistic fund states.
4. Policy Limits for Employers Liability Coverage.
5. Estimated Premiums.

General Section

1. The Policy – Establishes that the policy is a contract between the employer and the insurer. The terms of the policy can’t be changed or waived, except by endorsement.
2. Who is Insured – Establishes that the employer is the insured.
3. Workers’ Compensation Law – The law of each state named in the Information Page. It doesn’t include Federal Workers’ Compensation or Occupational Disease laws.
4. State – Any state in the United States, including the District of Columbia. An injured employee is entitled to benefits in the state where the injury occurs.
5. Locations – All workplaces, locations, and states listed in the Information Page.

Part One – Workers’ Compensation Insurance

1. How This Insurance Applies – This insurance applies to bodily injury by accident, bodily injury by disease, or bodily injury resulting in death.
   1. The accident must occur during the policy period.
   2. The bodily injury must be caused by the conditions of employment.
2. The Insurer Will Pay – The insurer will promptly pay the Workers’ Compensation benefits due.
3. 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.
4. The Insurer Will Also Pay – The following amounts, in addition to other amounts payable:
   1. Expenses incurred by the insured, at the request of the insurer, but will not pay loss of earnings.
   2. Premiums for appeal bonds.
   3. Litigation costs taxed against the insured.
   4. Interest on a judgment against the insured.
   5. Expenses incurred by the insured.
5. Other Insurance – The insurer won’t pay more than its share of benefits and costs covered by the policy.
6. Payment of the Insured Must Make – The insured is responsible for paying benefits in excess of those provided by the Workers’ Compensation law, including those required because of the:
   1. Insured’s serious of willful misconduct.
   2. Insured knowingly employing an employee in violation of law.
   3. Insured failing to comply with health or safety laws.
   4. Insured firing, coercing, or otherwise discriminating against an employee in violation of the Workers; Compensation law.
      Note: If the insurer makes any excess payments, the insured must promptly reimburse the insurer.
7. Recovery from Others (Subrogation) – The insurer reserves the right to recover its payments from anyone liable for injury.
8. Statutory Provisions – The following apply as required by law:
   1. Notice of an injury must be given to the insured promptly.
   2. Bankruptcy of the insured doesn’t relieve the insurer of its duties under the policy.
   3. The insurer is liable to any person entitled to the benefits under the policy.
   4. Under the Workers’ Compensation law, jurisdiction over the insurer is jurisdiction of the insured.
   5. The policy will conform to Workers’ Compensation laws that apply to benefits and assessments payable under the policy, such as taxes, special funds, etc.
   6. Terms of this policy that conflict with state law are automatically changed to conform to that law.

Part Two – Employers Liability Insurance (Stop-Gap Coverage)

1. How This Insurance Applies – This insurance applies to bodily injury by accident, disease, or death.
   1. The bodily injury must:
      1. Arise out of, and in the course of, employment.
      2. Take place during the policy period.
      3. Be caused by the conditions of employment.
   2. The employment must be necessary to the work described in the Information Page.
   3. Any suits for damages for bodily injury must occur in the U.S., its territories and possessions, or Canada.
   4. The insurance protects the insured against damages under the Doctrine of Dual Capacity, which applies when an employee injured by the product the employer manufactures.
      Note: Employees can’t purchase supplemental benefits.
2. The Insurer Will Pay – The insurer will pay the sum, up to the policy limits, the insured must legally pay for damages because of bodily injury to employees. The bodily injury must be covered by Part Two- Employers Liability Insurance, and the damages paid by the insurer include:
   1. Those for which the insured is liable to a third party because of a claim.
   2. Care of loss of service.
   3. Consequential bodily injury to an injured worker’s spouse, or immediate family members.
3. Exclusions –
   1. Liability assumed under a contract.
   2. Punitive damages awarded because an employee was employed in violation of law.
   3. Bodily injury to an employee while employed in violation of law with the knowledge of an insured.
   4. Any obligation imposed by any Workers’ Compensation, Occupational Disease, Unemployment Compensation, or Disability Benefit law.
   5. Bodily injury intentionally caused by the insured.
   6. Bodily injury caused outside of the United States, its territories and possessions, or Canada. (Injury to a resident temporarily outside of these areas would be covered).
   7. Damages arising out of coercion, criticism, defamation, evaluation, reassignment, discipline, harassment, humiliation, termination of, or discrimination against, any employee, as well as arising from any personnel practices, policies, acts, or omissions.
   8. Bodily injury arising from work that falls under federal jurisdiction.
   9. Fines or penalties imposed for a violation of federal or state law.
   10. Damages payable under the Migrant and Seasonal Agricultural Worker Protection Act.
4. 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.
5. The Insurer Will Also Pay – The following amounts in addition to other amounts payable under the policy:
   1. Expenses incurred by the insured, at the request of the insurer, but not loss of earnings.
   2. Premiums for appeal bonds
   3. Litigation costs taxed against the insured.
   4. Interest on a judgment against the insured.
   5. Expenses incurred by the insurer.
6. Other Insurance – The insurer won’t pay more than its share of the benefits and costs covered by the policy.
7. Limits of Liability – The Limits of Liability shown on the Information Page are the most the policy will pay for all damages covered by the policy for bodily injury by accident or disease. The minimum limits are $100,000 per accident for injuries, $100,000 per employee for disease, and $500,000 aggregate for disease.
8. Recovery From Others (Subrogation) – The insurer reserves the right to recover its payments from anyone liable for injury.
9. Actions Against the Insurer – There will be no right to actions against the insurer unless:
   1. The insured has complied with all terms of the policy.
   2. The amount owed by the insured has been determined with the insurer’s consent or by trail and final judgment.

Part Three- Other States Insurance

1. This insurance applies only if more than one state is shown in Policy Territory in the Information Page.
2. If the insured begins work in a state listed in the information Page after the effective date of the policy, the insurance will apply if other insurance doesn’t exist.
3. The insurer will reimburse the insured for any payments made where insurance applies and the insurer isn’t allowed to pay directly.
4. The insured must notify the insurer within 30 days when entering a state not listed in the Information Page.

Part Four – The Insured’s Duties if Injury Occurs

1. Provide for immediate medical services required by law.
2. Give the insurer the names and addresses of the injured persons and any witnesses.
3. Promptly forward all notices, demands, and legal papers related to the injury to the insurer.
4. Cooperate with the insurer’s investigation.
5. Don’t interfere with the insurer’s subrogation rights.
6. Don’t voluntarily make any payments, assume obligations, or incur expenses, unless such expenses are at the insured’s own cost.

Part Five – Premium

1. Insurer’s Manuals – All premiums are determined by the insurer’s manuals of rules, rates, rating plans, and classifications as authorized by state law.
2. Classifications – The classification shown in the Information Page are assigned based on an estimate of the exposures the insured would have during the policy period.
3. Remuneration – The premium for each work classification is determined by multiplying a rate and a premium basis. This is the most common premium calculation approach.
4. Premium Payments – The insured will pay the entire premium when due.
5. Final Premium – The final premium will be determined, after this policy ends, by using the actual, not the estimated, premium basis and the proper classification that applies by law. If cancelled:
   1. By the Insurer – The final premium will be calculated pro rata for the time the policy was in force.
   2. By The Insured – The final premium will be based on the time the policy was in force and increased by the insurer’s short rate cancellation table.
      Note: Deposit premium is the advanced premium charged when a Certificate of Insurance is issued. Deposit premium is based upon estimated payroll.
6. Records – The insured will keep records of information needed to calculate the premium. The insurer will receive copies upon request.
7. Audit – The insurer may audit any records pertaining to the policy at any time, including three years after the policy period ends.

Part Six – Conditions

1. Inspection – The insurer has the right, but not the obligation, to inspect the insured’s workplace.
2. Long Term Policy – If a policy period lasts for more than one year and 16 days, all policy provisions shall apply as if a new policy were issued at each annual anniversary date that the policy is in force.
3. Transfer of the Insured’s Rights and Duties – The insured isn’t allowed to transfer any rights and duties under the policy without the insurer’s written consent.
4. Cancellation
   1. If the policy is cancelled by the insurer, the insurer must provide written notice to the insured, stating when the cancellation will take effect.
   2. Generally, the insurer must give the insured at least 10 days’ written notice.
   3. The policy will end on the day and hour stated in the cancellation notice.
   4. This policy will automatically comply with any changes in the law regarding cancellation.
5. Sole Representative – The first Named Insured will act on the behalf of all insureds, receive any unearned premium.

Selected Endorsements

Voluntary Compensation Endorsements

1. This endorsement is used when an employer wishes to provide Workers’ Compensation benefits to employees even though the law doesn’t require the employer to provide coverage.
2. The following information must be provided in the endorsement:
   1. The class of employees to be covered.
   2. The state of employment.
   3. The designated state’s Workers’ Compensation Law.

Foreign Coverage Endorsement

1. This endorsement makes the coverage under a Workers’ Compensation Policy around-the-clock, continuous coverage for those employed in foreign operations or endeavors.
2. It covers locally prevalent diseases to an area as an occupational disease, and includes the option to buy coverage for the additional amount necessary to return the employee to the United States.

Premium Computation

Manual Rating (Job Classification)

Under this rating method, the rates for Workers’ Compensation are based upon job (work) classifications. Each job classification has a corresponding manual rate. Rates are more expensive for higher-risk occupations. Basic premiums are determined by multiplying the manual rate for each job classification by each $100 of payroll for that job classification. A new employee will be under the classification that describes the risk. The main purpose is to categorize employees according to their common exposures.

Experience Rating

This rating method is used to encourage employers to decrease the frequency and severity of accidents, by basing premium on the prior loss experience of the employer.
Example: If the employer’s experience is .90, the premium charged will be 10% lower than the manual. If the experience is 1.25, a surcharge of 25% over the manual rate will apply. In this example, the .90 and 1.25 are known as “experience modification factors”.

Premium Discount

This rating method takes into account the fact that certain expenses included in the premium rate are fixed and don’t increase as the size of the risk increases. Therefore, larger risks receive a “discount” as credit for those expenses that don’t increase proportionately with risk.

Participating Plans (Dividend) Under this rating method, the insured is eligible for a premium refund (dividend) if the experience over the policy period falls within the guideline established by the insurer. This provides for effective insurance based upon the current policy period.

Retrospective Rating

This rating method established rates in which the current year’s premium is calculated to reflect the actual current year’s loss experience. An initial premium is charged and then adjusted at the end of the policy period to reflect the actual loss experiences of the business.

Other Sources of Coverage

Assigned Risk Plan (Residual Market Plan)

1. Many states offer an employer that is unable to purchase coverage in the voluntary market the opportunity to obtain coverage in a Workers’ Compensation Assigned Risk Plan.
2. Typically, insurers who write Workers’ Compensation Insurance in the voluntary market in the state must participate in the Assigned Risk Plan.
3. Some states, in lieu of Assigned Risk Plans, have established State Insurance Funds as an alternative for an employer to purchase Workers’ Compensation Insurance. The fund operates as a public insurer (sponsored and controlled by the state) that competes with private insurers in the class of Workers’ Compensation Insurance, and issues a policy similar to those issued by private insurers conforming to the Workers’ Compensation laws of the state.

Self – Insurance Plans and Employer Groups

1. All states, except North Dakota and Wyoming, allow employers to self-insure upon satisfying certain statutory requirements that are a guarantee of their ability to meet their obligations.
2. Large employers are sometimes attracted to self-insurance plans because losses can be predictable and benefits are capped by statute.
3. Employers must obtain a Self- Insurance Certificate and may also purchase excess insurance or reinsurance.
4. Some states also require the employer to purchase a surety bond.

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