CHAPTER 12 - WORKER'S COMPENSATION INSURANCE

What are the three common law defenses of an employer?

1.) Assumption of Risk: here the defense says that the injured person was aware of the danger, and by voluntarily exposing himself/herself to the risk, was not entitled to collect for his/her injuries. 2.) Contributory Negligence: an employee who contributed in any way (even as little as 1%) to his/her own injury was not entitled to any recovery. This was a rather harsh defense, since few accidents involved no contribution by the employee. 3.) Fellow Servant Rule or Negligent Act by a Fellow Employee: an employee who was injured by the negligent act of a fellow employee should not be the responsibility of the employer. The argument was that if the employee was injured by a fellow employee, he/she should bring claim against the person who caused the injury.

What are the seven compliance requirements for employers?

1.) Employers must present a Worker's Compensation Information Form to all new employees stating what benefits are available, that all injuries should be reported, and the employee's right to appeal. The form must indicate the name of the insurance company providing the coverage. 2.) Employers must post in a prominent place the notices stating, "Remember it is important to tell your employers about your injury." 3.) Employers may establish a healthcare provider list with at least six designated providers. The employee is obligated to use a provider from the list for at least 90 days. After 90 days, the employee can go to their own provider as long as they give 5 days notice. If no list is provided, the employee may choose his/her own provider. 4.) Employees must notify their employer of an injury within 21 days to be eligible for benefits. Notice given after 120 days may result in denial of benefits. 5.) The employer must notify the Department of Labor and Industry within 8 hours of an accident resulting in death. All accidents resulting in injury, except those where the employee is back to work within one day, must be reported within 7 days, and a copy must be provided to the employer's insurer. 6.) Employers are required to record all injuries. 7.) A Notice of Denial must be sent to the Department of Labor and Industry and the employee within 21 days of disability. Employees may request a hearing if coverage has been denied.

Name the Employers Liability Exclusions:

1.) Liability assumed under a contract. 2.) Punitive damages if a worker is employed in violation of law. 3.) Bodily injury to an employee while employed in violation of law. 4.) Worker's Compensation is excluded under Part Two - Employers Liability 5.) Bodily injury intentionally caused by the employer. 6.) Bodily injury outside the U.S., it's territories, and Canada except for those outside on a temporary basis. 7.) Wrongful Discharge and Discrimination of any employee (Employment-Related Practices Exclusion). 8.) Violation of Federal Laws.

What are the five common law obligations that employers have to their employees?

1.) Provide a reasonable safe place to work. 2.) Provide reasonable safe tools. 3.) Provide reasonably qualified fellow employees. 4.) Set up safety rules and enforce them. 5.) Warn employees of any known dangers of the job.

What are the four types of benefits provided under Worker's Compensation?

1.) Unlimited Medical Benefits: Unlimited Medical Benefits are all reasonable and necessary medical expenses due to work related injury or disease. If an employer posts a healthcare provider list (with at least 6 providers), the employee must use these providers for at least 90 days. After 90 days, the employee can go to their own provider as long as they give a 5-day notice. If the employer doesn't have a list, the employee may choose any health provider. 2.) Income Benefits: Income Benefits are 66 2/3% of the average weekly wage, subject to minimum and maximum benefits. Benefits begin after a 7-day waiting period and are retroactive if the disability lasts beyond 14 days. There are four types of disability: a.) Permanent Total Disability - permanent and can't ever work again. b.) Temporary Partial Disability - can do some work. Benefits payable up to 500 weeks. Light duty may apply. c.) Permanent Partial Disability - scheduled benefits (loss of finger, loss of hand, loss of hearing, or loss of sight). d.) Temporary Total Disability - short term total disability (broken leg). e.) Impairment Rating. 3.) Death Benefits: Include: $3,000 burial allowance AND these survivor benefits: Family (Spouse & Children) - 66 2/3%* Family (Spouse & Child) - 60%* Spouse Only - 51%* Child Only - 32%* *These percentages are the wages of the deceased, but not in excess of the statewide average weekly wage. Minimum payable under death benefits will not be less than 50% of the statewide average weekly wage. Spouse benefits are payable for life or remarriage (then 2 year lump sum). Children benefits are payable to age 18 or to age 23 if still in school. 4.) Rehabilitation Benefits: Covers necessary therapy (physical, occupation) and devices (wheelchairs, etc.) to aid in the rehabilitation process. Vocational training is also covered.

Item #3 is divided into 3 major sections, what are they?

3A - Worker's Compensation Insurance - identifies which states are included for coverage. 3B - Employer's Liability Coverage Limits. 3C - Other States Coverage

What is the purpose of Part Three - Other States Insurance?

An insured employer who has ongoing operations in a state should list that state in Item 3A of the Information Page. However, if the insured's home office is in Pennsylvania, but the insured has offices in Maryland and Delaware, then Pennsylvania, Maryland, and Delaware should all be listed. There may be times when an insured employer has Worker's Compensation and Employer's Liability exposures in other states where the insured does not have ongoing operations. The purpose of the Part Three - Other States Insurance is to provide coverage for incidental exposures in those states other than those listed in Item 3A. These incidental exposures are for temporary, traveling to or through other states, and occasional work in those states. Part Three - Other States Insurance is NOT designed to provide Worker's Compensation and Employers Liability Insurance in every state on a blanket basis. As we saw earlier, individual state laws vary in terms or benefit levels.

What is covered under Rehabilitation Benefits?

Covers necessary therapy (physical, occupation) and devices (wheelchairs, etc.) to aid in the rehabilitation process. Vocational training is also covered.

Under death benefits, how much is the burial allowance and what are the survivors benefits?

Death Benefits: Include: $3,000 burial allowance AND these survivor benefits: Family (Spouse & Children) - 66 2/3%* Family (Spouse & Child) - 60%* Spouse Only - 51%* Child Only - 32%* *These percentages are the wages of the deceased, but not in excess of the statewide average weekly wage. Minimum payable under death benefits will not be less than 50% of the statewide average weekly wage. Spouse benefits are payable for life or remarriage (then 2 year lump sum). Children benefits are payable to age 18 or to age 23 if still in school.

What types of employment are exempt from coverage?

Despite the inclusive nature of the Pennsylvania Worker's Compensation Law, there are certain individuals who are exempt due to the nature of their employment. The following types of employees are exempt: 1.) Domestic servants or workers (maid, nanny, cook, etc.) 2.) Casual workers (gardener, someone who is not normally employed by you such as a handyman, etc.) 3.) Agricultural employment (employees who earn less than $1,200 per year or who work less than 30 days per year). An example of this category could be a migrant worker. 4.) Real estate salespersons. 5.) Elected officials of the Commonwealth or any of its subdivisions.

Explain Job Classification:

Each job is classified according to its job activity characteristics and the danger directly related to performing the job. The higher the risk the higher the rate for the job classification. Each job is assigned a numerical classification code. Here are examples of two classifications out of the manual: CLERICAL OFFICE EMPLOYEE - has a classification code of 0953 which has a rate of $0.37 per $100 of payroll. A clerical office class excludes work or services areas, and the clerical work area is separated from other work areas by partitions, walls, or floors. SALESPERSONS, COLLECTORS, OR MESSENGER - outside is classified 0951 which receives a rate of $0.79. These are employees engaged in such duties away from the employer's premises. This classification does not apply to employees who deliver merchandise. The payroll information for each classification is recorded, and a premium is assigned for each job classification for the insured. The rate is computed per $100 of payroll. If a company has a payroll of $50,000 for a Clerical Office Employee - 0953, the computation would be: $50,000/$100 = 500 units X $0.37 = $185.00. The various premiums for each job classification are then summed, and an expense constant (expense item added to each policy to cover expenses common to all policies) equals the state premium.

Can an injured worker use a healthcare provider of their choice?

Employers may establish a healthcare provider list with at least six designated providers. The employee is obligated to use a provider from the list for at least 90 days. After 90 days, the employee can go to their own provider as long as they give 5 days notice. If no list is provided, the employee may choose his/her own provider. So as long as the injured worker isn't within the 90 day time frame, gives the required 5-day notice if they are outside the 90 day time frame, or there was no list provided by the employer, then the employee may use a healthcare provider of their choice.

What is the penalty if employers fail to comply with the law?

Employers who do not comply with this law and are found guilt of a misdemeanor can be fined up to $2,500 and up to one year imprisonment for each day the employer is in violation of the requirement to maintain worker's compensation coverage. If the employer is found guilty of a felony, this can result in the potential fine of up to $15,000 and up to seven years imprisonment for each day the employer intentionally violated this requirement. Further, the employer and those individuals responsible to act on its behalf may be required to pay all benefits awarded by a worker's compensation judge.

Discuss the following Federal Worker's Compensation Laws: Federal Employers Liability Act (FELA) U.S Longshore and Harbor Workers Compensation Act The Jones Act - The Merchant Marine Act of 1920 Federal Mine Safety and Health Act (Mine Act)

Federal Employers Liability Act (FELA): Was passed to provide the exclusive remedy for railroad employees who receive work-related injuries caused by the negligence of their employers. FELA is only applicable to common carriers using a railroad involved in interstate commerce. This law is based on negligence, unlike the Worker's Compensation Laws that are no-fault. Under FELA the worker must show that the railroad was negligent, and this negligence was the proximate cause of the injury. U.S Longshore and Harbor Workers Compensation Act: Was designed to provide compensation and medical benefits to land-based employees (those that are not masters or members of the crew) while working on navigable waters. Covered workers here include those whose job involves loading and unloading ships, ship construction and repair, and construction/maintenance of docks, piers, and wharves. Those individuals who come under this act are entitled to unlimited medical benefits (subject to reasonable medical standards) and prescribed weekly disability benefits. The Jones Act - The Merchant Marine Act of 1920: A Federal Employers Liability Law which provides seamen with a tort remedy when they incur a work related injury. The Jones Act was passed to provide a way for seamen to successfully bring a negligence claim against his/her employer. The law removes or modifies the Common Law Defenses as we saw in FELA. The law only applies to American seamen on American ships. A seaman is any person employed on the vessel so as to accomplish the ship's mission. This could be any person anywhere from navigator to a cook. Federal Mine Safety and Health Act (Mine Act): Provides the framework for the actions of the Mine Safety and Health Administration (MHSA), and covers all mine operators and miners throughout the United States, Puerto Rico, the Virgin Islands, America Samoa, Guam, and the Trust Territory of the Pacific Islands. The mission of the MHSA is to administer the provisions of the Mine Act, including the inspection of all underground mines at least four times a year to enforce compliance with mandatory safety and health standards in order to eliminate fatal accidents, minimize health risks, and to promote improved safety and health conditions. In addition, miners can report violations and request additional inspections.

Identify the Limits of Insurance under 3B - Employers Liability Insurance:

In Part Two - Employers Liability, there are three limits (100/500/100): 1.) Bodily Injury By Accident - Each Accident ($100,000) 2.) Bodily Injury By Disease - Policy Limit ($500,000) 3.) Bodily Injury By Disease - Each Employee ($100,000)

Under the Pennsylvania Worker's Compensation Act, what employment is covered?

In Pennsylvania, all private and public employments are subject to the Worker's Compensation Act. Employers may be exempt from providing coverage to an employee whose religious group prohibits benefits from insurance, provided that the religious group makes provisions for its members.

What is a monopolistic state? List them:

In the states of North Dakota, Ohio, Washington, and Wyoming, an employer can only purchase Worker's Compensation through the respective state fund. These states are called monopolistic states.

Explain income benefits:

Income Benefits are 66 2/3% of the average weekly wage, subject to minimum and maximum benefits. Benefits begin after a 7-day waiting period and are retroactive if the disability lasts beyond 14 days.

What is an Experience Modification Factor and how is it derived?

Measures the individual employer's loss experience against the average loss experience for its job classification. Future premiums are based upon past loss experience. Each year the Pennsylvania Compensation Rating Bureau (PCRB) calculates the factor to be applied to the insured's renewal premium. The experience modification factor for its current policy year is generally based on the insured's loss experience over three prior years, ending one year prior to the policy effective date. To determine the experience modification factor for 2013-2014, the rating bureau uses the losses and final audited premium for 2011-2012, 2010-2011, and 2009-2010. An experience modification of less than 1 is good and more than 1 is unfavorable. (EXAMPLE: If the insured has a standard premium of $10,000 and experience modifier of 0.65 then the insured would have experience premium of $6,500 ($10,000 X 0.65 = $6,500) instead of $10,000. If the insured in the same example had an experience modifier of 1.15, he/she would have to pay $11,500 ($10,000 X 1.15 = $11,500) instead of the standard premium of $10,000.

What is the Subsequent Injury Fund and what is the purpose of the Fund?

Most states have what is referred to as a Subsequent Injury Fund which pays a portion of all claims by an employee who has had a previous injury, and who suffers another injury. **EXAMPLE: Jill applies for a job as a welder with Northwest Construction Company. At Jill's previous job, she had an accident that caused her to lose sight in one eye. The loss of sight in no way prevents Jill from being a top notch welder, so Northwest hires her. Several months after she begins work, she is involved in an accident that renders her completely blind, and she is considered under the Worker's Compensation Law as totally and permanently disabled.** The Subsequent Injury Fund was designed with two purposes in mind: 1.) To equitably allocate the costs of providing benefits in cases where an injury combines with a pre-existing condition(s). In the above example, the employer is now facing a claim in which her Worker's Compensation Coverage is going to be responsible for considerably more than if the employer has hired someone without previous injury. The Second Injury Fund is designed so that the employer's Worker's Compensation does not have to shoulder all the payment. 2.) To encourage hiring and retaining the physically challenged. By the fact that the employer is not held responsible for all the payment, and not severely penalized for this type of loss, an employer will be more inclined to hire a qualified person with a previous injury. The Worker's Compensation insurer will pay the claim to an amount equal to what they would have been responsible for if it had been the only injury. So, in our example of Jill, the Worker's Compensation insurer of Northwest would pay for the loss of one eye and the subsequent injury fund would pay the remaining portion of the claim.

Name 4 situations where Employers Liability will pay:

The Employer's Liability Insurance coverage promises to pay for the insured's liability to pay damages, because of bodily injury to an employee as a result of an accident and/or disease arising from employment by the insured. The accident or last exposure to conditions of employment must occur during the policy period, and any suit must be brought in the coverage territory. The policy actually gives some examples of situations where it will pay. They include: 1.) Third-party claims (action over) or those claims made against the employer by others (third parties) who have been held liable for an employee injury. (EXAMPLE: ABC Inc is sued by a manufacturer who had to pay an employee of ABC Inc due to a lawsuit. Now the manufacturer sues ABC Inc stating that ABC Inc didn't properly train their employee.) 2.) Care and loss of services; these claims include loss of consortium claims that are brought by the injured employee's spouse. 3.) Consequential bodily injury to a spouse or immediate relative of the employee. (EXAMPLE: Maddy's spouse Austin, when learning of his wife's work related injury, suffers a heart attack and files suit against the employer). 4.) Dual capacity occurs when an employee is injured and the employer may be sued in a capacity other than the employer. (EXAMPLE: Ben is employed by ABC Ladder Manufacturing. While at work, Ben was using a ladder manufactured by ABC to change a light bulb when the ladder broke. Ben fell and broke his arm. Ben filed a Worker's Compensation claim as the employee but is also suing ABC as the manufacturer of the ladder (faulty product)).

What is SWIF?

The Fund is a competitive state fund which provides Worker's Compensation Insurance similar to that provided by private insurers. The Fund, similar to those found in several other states, serves as the market of last resort, because there is no assigned risk plan in Pennsylvania. An employer who makes an application to the Fund may designate a broker as the employer's representative, but the Fund does not pay commissions, and brokers are not permitted to issue Certificates of Insurance.

What is the purpose of the Voluntary Compensation - Employer Liability Coverage Endorsement?

The purpose of this endorsement is to provide coverage to those individuals who are not covered under Pennsylvania's Worker's Compensation Law. These workers could be domestics, farm, and casual workers. These exempt employees may bring suit against the employer for an on-the-job injury resulting from the employer's failure to meet his/her/its common law obligations. To avoid this problem, an employer may elect to provide coverage on a voluntary basis for exempt employees. The addition of this endorsement to the Worker's Compensation Policy provides the coverage. Before anything is paid, the person receiving the benefits must release the insured and insurer from all responsibility for injury and death.

What are the four types of disability?

There are four types of disability: 1.) Permanent Total Disability - permanent and can't ever work again. 2.) Temporary Partial Disability - can do some work. Benefits payable up to 500 weeks. Light duty may apply. 3.) Permanent Partial Disability - scheduled benefits (loss of finger, loss of hand, loss of hearing, or loss of sight). 4.) Temporary Total Disability - short term total disability (broken leg). 5.) Impairment Rating.

Explain the No-Fault concept:

Today, employees give up their right to sue their employers in exchange for the Worker's Compensation Laws that guarantee medical, income, rehabilitation, and death benefits. Employers pay these specified damages without regard to fault. The Worker's Compensation System became what is called the exclusive or sole remedy to the employee. In Pennsylvania, Worker's Compensation coverage is compulsory.

What is the purpose of Worker's Compensation Insurance?

Worker's Compensation provides coverage to employees for accidental bodily injury and/or occupational diseases that arise out of, or in the course of, their employment.