16.0 Workers' Compensation Insurance
Learning Objectives
16.1 Types of Laws
Before the adoption of Workers’ Compensation laws, an employee injured on the job generally had to file a lawsuit against the employer and prove that the employer’s negligence caused the injury. Recovering damages was often difficult because employers could rely on several common law defenses to avoid liability. The three primary common law defenses were:
16.2 Employment Conditions
Covered Employment
16.3 Benefits Provided
Workers’ Compensation benefits are established by state law, so benefit amounts, benefit types, and disability definitions vary by state. However, most states provide medical benefits, disability income benefits, rehabilitation benefits, death benefits, and survivor benefits.
16.4 Second Injury Fund
A Second Injury Fund provides benefits when an employee with a preexisting disabling condition sustains a new work-related injury, and the combined effect of both injuries results in a greater disability than the second injury alone would have caused. In these cases, the fund helps pay the additional compensation owed to the employee, reducing the employer's financial responsibility.
16.5 Workers' Compensation and Employers Liability Insurance Policy
Most states use the standard Workers' Compensation and Employers Liability Policy developed by the National Council on Compensation Insurance (NCCI). The policy is only six pages long because the specific benefits provided are determined by each state's Workers' Compensation laws rather than the policy itself. The standard policy consists of the following sections:
16.6 Part One – Workers' Compensation Insurance
The following sections are included in Part One of the standard Workers’ Compensation policy.
16.7 Part Two – Employers Liability Insurance
Employers Liability insurance covers bodily injury and other damages for which the employer is legally liable but are not covered by Workers’ Compensation or occupational disease laws. It protects the employer against lawsuits arising from workplace injuries, including:
16.8 Part Three – Other States Insurance
The policy can provide coverage for employers with operations in multiple states, as permitted by state law. Employers must list the states where they currently operate and any states where they may have future exposures on the Information Page. However, employers with operations in monopolistic states must purchase Workers' Compensation coverage directly from the state insurance fund, as private insurers cannot provide this coverage in those states.
16.9 Part Four – The Insured's Duties if Injury Occurs
If a workplace injury occurs, the employer has several responsibilities under the policy. The employer must:
16.10 Part Five – Premium
Our Manuals
16.11 Part Six – Conditions
Inspection
16.12 Selected Endorsements
Voluntary Compensation Endorsement
16.13 Other Sources of Coverage
Assigned Risk Plan (Residual Market Plan)
Recap of Chapter Sixteen
Workers’ Compensation is the exclusive remedy for most job-related employee injuries. Under this system, employers assume liability for covered workplace injuries, and injured employees generally waive the right to sue the employer. Benefits are provided regardless of fault. Covered injuries include occupational accidents, which are unplanned events that occur during employment and cause injury, and occupational diseases or illnesses that arise from conditions of employment.