Whether you’re an insurance broker, risk advisor, or corporate risk manager, understanding workers’ compensation coverage is essential. This comprehensive guide will help you understand the crucial aspects of this critical insurance policy. Workers’ Compensation benefits injured employees and their families for medical care, partially lost wages, and funeral costs. It also protects employers from costly lawsuits and state fines.
What is Workers’ Compensation?
Workers’ compensation coverage is a social insurance system that provides cash benefits and medical care to injured or ill employees. It is mandated by most states and paid for by employers who buy coverage from private insurers or state-certified compensation insurance funds. In addition to medical and income benefits, workers’ compensation systems also offer incentives for companies to reduce the risk of injuries. They provide partial wage replacement, partial disability payments, and vocational rehabilitation if an employee cannot work. Disputes are disagreements between parties in workers’ compensation claims over who should get what kind of benefits and how much. Most disputes center on whether the employee can receive medical or income benefits and how much the employer must pay.
Who is Covered by Workers’ Compensation?
Workers’ compensation insurance covers workers who are injured on the job. The insurance typically includes cash benefits, medical treatment, and disability or death benefits. Most states require employers to carry workers’ compensation coverage. However, some exceptions apply. For example, many states exclude certain professional employees, such as real estate agents and independent contractors. Some states also allow business owners to exempt their immediate family members from workers comp laws, including parents and children employed by the business. This can be a great way to avoid coverage costs.
In most cases, workers’ compensation coverage replaces some of an employee’s lost wages when they cannot work due to a workplace injury or illness. In addition, it can cover ongoing care expenses, like physical therapy. Most workers’ compensation policies cover various injuries and illnesses, from mild to severe. These include occupational diseases and injuries due to working conditions or chemicals in the workplace.
What is the Purpose of Workers’ Compensation?
Workers’ Compensation ensures injured employees receive prompt and effective medical treatment for their on-the-job injuries or illnesses, no matter who caused them. It also provides employees with a way to receive lost wages and Compensation for their rehabilitation costs without having to sue their employer for those losses. Most states’ adoption of Workers’ Compensation in the second decade of the twentieth century was a significant change in social policy. It was adopted in the belief that a trade-off could be made between employers and employees to ensure workers were treated promptly for on-the-job injuries or illnesses, regardless of who was at fault. Before the adoption of Workers’ Compensation statutes, workers trying to recover medical expenses, lost wages, and other damages had to prove negligence on the part of their employer in a long, time-consuming, and uncertain process that negatively affected their lives. In addition, employers had several defenses they could use to avoid liability for their employees’ injuries and losses. These problems created a need for radical reform.
What is Employer’s Liability Insurance?
Employer’s Liability Insurance protects businesses from claims filed by employees over work-related injuries or illnesses. It is generally sold as an additional coverage part of a workers’ compensation policy but is often available through private insurance companies in some states. It is typically more expensive than worker’s comp, especially for larger businesses that hire more employees and have higher average payroll costs. It can also be more costly for companies with a history of filing employee lawsuits. Workers’ Compensation covers most workplace accidents, but employer’s liability insurance responds to a broader range of claims. It may pay for legal defense costs and any judgments or settlements from an employee’s lawsuit. Other types of employer’s liability claims include third-party cases brought on by employees who believe they were injured in the workplace and loss of consortium claims made by spouses who claim a reduction in spousal benefits because of an employee’s injury or illness. Additionally, non-employees affected by an employee’s job can file consequential bodily injury lawsuits. These are not common, but they can happen.
How Does Employer’s Liability Insurance Work?
Employees who sue for workers’ compensation benefits often do so because they think an employer’s negligence caused their workplace injury or illness. In other cases, injured workers can also sue third parties associated with their injury or disease. In these situations, employers’ liability insurance (also known as stop-gap coverage) protects your business. Specifically, part one of your policy covers the benefits that are legally required to be paid under your state’s workers’ compensation statutes. Part two of your policy insures you for damages that an employee may collect from a third party for their injuries or illnesses beyond what is covered by workers’ Compensation. These include non-economic damages such as pain and suffering, mental anguish, and loss of consortium. While workers’ Compensation is vital to any business, it doesn’t cover every claim. Some exclusions are intentional injuries, wrongful acts such as criminal acts or fraud, and claims related to downsizing, workforce restructurings, plant closures, mergers, and acquisitions.
