18. Workers Compensation
Which one of the following is NOT a benefit of workers compensation insurance? A) Rehabilitation costs. B) Pain and suffering. C) Lost wages. D) Medical expenses.
Answer: B Pain and suffering is not a type of benefit covered by workers compensation insurance.
All of the following could create an employers liability loss EXCEPT: A) legal defense costs. B) lawsuit brought by an injured worker's spouse. C) an employee not covered by the workers' compensation law. D) personal injury.
Answer: D Personal injury is not covered under Part Two of the workers' compensation policy. An injury to an employee due to employer negligence in a situation not covered under workers' compensation is covered under employers liability.
Which one of the following statements about workers compensation insurance is NOT correct? A) Every type of employment is subject to workers compensation laws. B) Workers compensation policies provide benefits for rehabilitation. C) Coverage for lost wages is a benefit of workers compensation insurance. D) Self-insurance of workers compensation is permitted.
Answer: A Every state excludes some types of jobs from workers compensation coverage. Possible exceptions include corporate officers who are sole shareholders, domestic employees who work a limited number of hours, and agricultural workers. When benefits are not required by law, an employer still may provide them on a voluntary or elective basis.
In most cases, an injured employee receives payments under workers compensation insurance from whom? A) Insurance company. B) Employer. C) Division of Workers Compensation. D) State Department of Employment.
Answer: A For the vast majority of workers compensation claims, the injured worker receives payments directly from an insurance company. An exception is if the employer has decided to self-insure and has obtained state approval for the self-insurance plan. While companies that self-insure are large and have many hundreds of employees, these represent a small percentage of the total number of employees covered by workers compensation in the United States.
State workers compensation insurance covers which of the following workers? A) Corporate CEOs. B) Crews of ocean-going vessels. C) Railroad employees. D) Harbor workers.
Answer: A In most cases, an executive of a company is considered to be a covered employee under workers compensation law. Federal law covers all the other workers. Crews of ocean-going vessels are covered by the Jones Act, and railroad employees are covered by the Federal Employers' Liability Act. Harbor workers are covered by the Longshore and Harbor Workers Compensation Act.
In states that use the workers' compensation competitive state funds method, all of the following would typically be viable options available to an employer EXCEPT: A) purchasing coverage from the state fund only. B) purchasing coverage from a private insurance company. C) if the employer meets certain criteria, providing coverage through self-insurance. D) purchasing coverage from the state fund.
Answer: A In states using the competitive state funds approach, employers are not limited to only being able to purchase workers' compensation insurance from the state fund. Other options are available, including those listed in the other answer chices.
A permanent partial disability is defined as any injury: A) that is permanent but that will allow the injured worker to perform some work. B) that permanently prevents the worker from performing any of his duties. C) that only lasts for a limited period. D) that results in lost wages.
Answer: A Permanent partial disabilities never go away but they do allow the injured worker to continue to perform some work. Preventing performance of any duties is the definition of permanent total disability. Only lasting a limited period is a temporary disability, and all the choices may result in some loss of wages.
Which of the following individuals would be eligible for workers' compensation benefits? A) Employee who falls on a wet factory floor. B) Employee who has a heart attack on the job. C) Employee who falls in a restaurant while on her lunch break. D) Employee who has an auto accident on the way home from work.
Answer: A The other examples did not arise out of employment or in the course of employment.
Workers compensation pays: A) without regard to fault. B) only when the employer is negligent. C) only when another employee is negligent. D) only when the employee is at fault.
Answer: A The problem with fault and negligence as the basis of recovery for employee injuries is that the defenses available to employers were extremely difficult to overcome, leaving many injured workers uncompensated. Modern workers compensation regulation took fault and negligence out of the equation for compensation and made employers responsible for injured worker benefits without regard to fault.
Workers' compensation laws cover employees in the course of employment. Some classes of workers, such as domestic servants, are exempt but may be covered by a voluntary compensation endorsement. This endorsement agrees to pay benefits: A) to employees not covered or exempt. B) to all employees. C) to employees who are exempt only. D) only if the employer requests that benefits be paid.
Answer: A This endorsement agrees to pay benefits to employees not covered or exempt under applicable state laws. For example, a specific state may require a minimum number of employees to be eligible under a workers' compensation policy. The employer may provide coverage on a voluntary basis by adding this endorsement to the workers' compensation policy.
What is the primary purpose of workers' compensation laws? A) Providing compensation to employees who have sustained injury, illness, or death during the course of employment. B) Making the workplace a safer environment. C) Providing benefits to workers who are laid off. D) Providing job security.
Answer: A Workers' compensation provides a just and fair means of compensating employees who have sustained injury, illness, or death during the course of employment.
Which of the following statements about workers' compensation is NOT correct? A) An employee who is eligible for workers' compensation coverage may sue a negligent employer. B) Workers' compensation covers work-related injuries. C) Most occupations are subject to state workers' compensation laws. D) An employee must accept the benefits mandated by law.
Answer: A Workers' compensation, which takes the form of a specified monetary benefit to the employee after a work-related injury, is paid without any consideration of fault or negligence on the part of either the employer or employee. It is an exclusive remedy, which means that the employee cannot sue the employer for work-related illnesses or injuries. It is also a certain remedy, for which the employee gives up the right to sue the employer for what could be a larger but uncertain benefit. Workers' compensation laws apply to most occupations.
Bob's construction company, based in Wisconsin, is doing a job in Illinois. Bob's declaration page for his workers' compensation policy lists Minnesota, Iowa, Illinois, and Wisconsin as states where he will do work. Pete, an employee working in Illinois, is injured on the job. How would Bobs' policy respond? A) Pay benefits only if Bob is held liable. B) Pay benefits based on Illinois workers' compensation laws. C) Pay benefits as if Pete had been injured in Wisconsin. D) Pete may choose coverage under the benefits that are best for him.
Answer: B Because Illinois is a state listed on Bob's declaration page, benefits will be paid under the statutes in the state of Illinois. Coverage does not apply in states not listed on the declarations page as long as the company was doing business when the policy commenced.
Part Two, Employers Liability insurance, of a workers' compensation insurance policy includes all of the following limits of liability EXCEPT: A) for each employee injured by disease during the policy term B) for all compensation paid under benefits required by workers compensation law. C) for all bodily injury arising from a single accident. D) for all bodily injury by disease during the policy term.
Answer: B Part Two, Employers Liability insurance, of a workers' compensation insurance policy includes limits of liability for all bodily injury arising from a single accident (regardless of the number of employees injured), for all bodily injury by disease during the policy term (regardless of the number of employees injured by disease), and for each employee injured by disease during the policy term. Part One, Workers' Compensation, of a workers' compensation policy promises to pay all compensation and other benefits required by workers' compensation law. No dollar limit applies to benefits paid under Part One except those that are a part of the law.
Premiums for workers' compensation policies are based upon the: A) type of business involved and the number of employees. B) work classification, number of employees, and the total payroll. C) number of employees and the total payroll. D) type of business involved and the total payroll.
Answer: B Premiums charged are based on the type of business (work or job classification) involved, the number of employees, and the total payroll. The rates vary greatly depending on the employment classification.
What is the primary purpose of workers compensation? A) Improve employees' working conditions. B) Provide compensation to employees for injuries arising out of their employment. C) Pay benefits to employees that are temporarily laid off. D) Provide accident insurance for employees, both on and off the job.
Answer: B Prior to the advent of workers compensation, most employees injured on the job went uncompensated, creating an economic burden for themselves, their family, and society. Workers compensation was introduced to provide a remedy for this situation.
Premiums for workers' compensation are: A) based on the amount of payroll and rates established for various occupational classifications set by the insurance companies. B) based on the amount of payroll and rates established for various occupational classifications set by the National Council on Compensation Insurance. C) based on the amount of payroll and rates established for various occupational classifications set by the state Insurance Departments. D) based on the amount of payroll and rates established for various occupational classifications set by the federal government.
Answer: B Rates established for various occupational classifications are set by the National Council on Compensation Insurance.
Which one of the following determines the amount of a workers compensation claim? A) Agreement of the parties. B) State law. C) Federal law. D) Mandate of the Commissioner.
Answer: B State law fixes the amount of compensation in a workers compensation claim. The compensation is paid without consideration of fault or negligence on the part of either the employer or employee. In exchange for this right of compensation, the employee gives up the right to sue the employer.
The standard workers compensation policy imposes all of the following duties on the employer EXCEPT: A) provide for immediate medical services as required by law. B) make voluntary payments to an injured employee. C) cooperate with the insurance company. D) immediately notify the insurance company of a work related injury.
Answer: B The benefits an injured employee is entitled to receive are specified by law, so there is nothing voluntary about them. The insured employer's duties in the event of a loss include notifying the insurer promptly of all legal notices or demands as well as providing immediate medical services, cooperating with the insurer, and immediately notifying the insurer of a work-related injury.
Ralph is a conductor employed by American Cross-Country Railway System. He routinely travels from Chicago to Los Angeles, and was injured falling from a train platform while helping passengers. Which of the following provides bodily injury coverage for Ralph? A) The U.S. Longshoremen's and Harbor Workers' Compensation Act. B) The Federal Employers Liability Act. C) The Jones Act. D) The Federal Employees' Compensation Act.
Answer: B This act covers employees of interstate railroads. It does not apply to postal employees, truckers who deliver freight to and from the railroad depot, or contractors involved in railroad construction or repair.
Coverage for workers' compensation may be obtained from all of the following EXCEPT: A) self-insurance. B) a commercial general liability policy. C) assigned risk plans. D) the Federal Employers Liability Act.
Answer: B Workers' compensation is included in state assigned risk plans, the FELA, and company self-insurance plans. A commercial general liability policy excludes workers' compensation claims because they are more appropriately covered elsewhere.
Sue, an employee of Paul's Bicycle Shop, was on a service call repairing some bicycles at Bill's home. On her way back to the shop she was involved in an automobile accident and injured. Where would Sue find coverage? A) Paul's auto policy. B) Both Paul's auto policy and workers' compensation policy. C) Paul's workers' compensation policy. D) Her own auto policy.
Answer: C Paul's workers' compensation policy would cover her bodily injury if she is injured on the job.
When calculating premiums for a workers compensation policy, the insurer will multiply the job classification rate by: A) a risk factor provided by the National Association of Insurance Commissioners. B) the number of employees in each job classification. C) the number of $100 payroll units paid to employees in each job classification. D) the total payroll for the company.
Answer: C Premiums for workers compensation insurance are based on the amount of payroll multiplied by the rates for various occupational classifications shown in the insurer's rate manual.
The insurer retains certain rights under the conditions section of a workers' compensation policy. Which of the following is one of those conditions? A) The insurer retains the right to inspect the insured's workplace for insurability when the insured can arrange it. B) The insurer does not have the right to inspect the insured's workplace for insurability at any time. C) The insurer retains the right to inspect the insured's workplace for insurability at any time. D) The insurer retains the right to adjust the premium if the loss experience becomes worse.
Answer: C The insurer retains the right to inspect the insured's workplace for insurability at any time. The insurer, however, is not obligated to do so.
Bob has a workers' compensation policy with the ABC Insurance Company. One of his employees is injured in the course of employment. All of the following are duties of Bob EXCEPT: A) providing medical services as required by workers' compensation. B) cooperate with the insurer in the investigation, settlement, or defense of a claim. C) pay for the medical bill of the injured employee. D) providing information to the insurer about the injury.
Answer: C The medical bills will be paid by the workers' compensation policy and are not Bob's responsibility. Another duty is to notify the insurer promptly of all notices, demands, and legal papers.
Bob is employed as ship's navigator on an American flagged ship in Duluth, MN, and is injured as a result of the owner's negligence. Under which law would Bob find coverage? A) Federal Employee Compensation Act. B) U.S. Longshoremen's and Harbor Workers' Compensation. C) Jones Act. D) Workers' Compensation.
Answer: C The purpose of the Jones Act is to provide coverage for the masters and crews of American vessels. The law permits the injured seaman to sue his employer for damages and to have a jury trial.
How many types of coverage does a workers' compensation policy have? A) Three. B) Six. C) Two. D) One.
Answer: C The workers' compensation policy provides bodily injury and employers liability coverage. The other four parts of the policy outline other states' insurance, duties of the insured, premiums, and conditions.
Joe is the general contractor building a new shopping center. He has hired subcontractors to do some of the work for him. What will cover the employees of the subcontractor if the subcontractor does not take out workers' compensation coverage? A) The Federal Employer's Liability Act. B) They must sue their employer for coverage. C) Joe's workers' compensation policy. D) Assigned risk plan.
Answer: C They would be covered under Joe's policy. To ensure that the subcontractors have coverage, Joe should require them to provide a certificate of insurance.
The purpose of employers' liability insurance is to provide A) voluntary workers compensation benefits. B) insurance for high-risk employers. C) liability protection where workers compensation does not apply. D) excess workers compensation benefits.
Answer: C Where workers compensation laws do not apply, injured workers are still entitled to sue their employer. Employers' liability insurance is available for those situations.
All of the following are benefits specified by workers compensation laws EXCEPT: A) medical expenses. B) rehabilitation benefits. C) retirement plan contributions. D) lost wages.
Answer: C Workers compensation laws provide that injured workers are compensated for their lost wages, the cost of covered medical expenses, death benefits, and the cost of rehabilitation. The laws do not provide for retirement plan contributions.
Which one of the following statements about workers' compensation insurance is CORRECT? A) The Social Security Administration handles the administration of workers' compensation benefits. B) Employers' liability insurance is the same as workers' compensation coverage. C) Workers' compensation benefits apply without regard to the employer's negligence. D) The legal foundation for workers' compensation is the doctrine of tort liability.
Answer: C Workers' compensation is a kind of no-fault insurance. Injured workers may receive benefits without having to prove that their employer was negligent. Typically, employers' liability insurance and workers' compensation insurance are found in the same policy but they are not the same coverage.
In workers' compensation insurance, premium discounts that reflect a lower expense in the handling of larger risks are applied if: A) a premium experience modification factor is applied. B) an experience modification factor is applied as a method of rewarding those employers with better-than-average loss experience. C) discounts are based on the type of business involved and the number of employees. D) the premium exceeds a stipulated amount.
Answer: D A premium discount applies if the premium exceeds a stipulated amount, because certain expenses do not increase after the premium reaches a set limit.
Pete's construction company has had some loss problems. Pete's carrier has informed him that his workers' compensation policy will not be renewed. What is Pete's best option for obtaining replacement coverage? A) Self-insurance. B) The Federal Employer's Liability Act. C) The Jones Act. D) Assigned risk plan.
Answer: D An assigned risk plan is Pete's best choice because his carrier must cover his company. He could self-insure, but only if he meets all the state requirements.
Bill's construction company had an experience modification factor added to his workers' compensation policy. What did this do to his premium? A) An experience modification factor is applied as a method of rewarding those employers with better-than-average loss experience. B) An experience modification factor is applied as a method of penalizing those employers with poor experience. C) Nothing. D) An experience modification factor is applied as a method of rewarding those employers with better-than-average loss experience and penalizing those with poorer experience.
Answer: D An experience modification factor is applied as a method of rewarding those employers with better than average loss experience and penalizing those with poorer experience. An insured with a good loss record pays a lower premium, and one with a poor loss record pays a higher premium.
Janet, an employee of Ted's TV Shop, is injured while playing baseball for the company-sponsored softball team. Under which policy would Janet find coverage for her injuries? A) Part one of workers' compensation. B) Part two of workers' compensation. C) Parts one and two of workers' compensation. D) Health insurance.
Answer: D Because Janet is not in the course of employment when she is injured, there would be no coverage under Ted's workers' compensation policy. Janet would be covered for her injuries under her personal health insurance policy.
Occupational diseases are covered under workers' compensation. All of the following are occupational diseases EXCEPT: A) exposure to chemicals on the job that lead to cancer. B) black lung disease for a coal miner. C) cancer contracted by workers working with asbestos. D) chicken pox that is contracted at work.
Answer: D Coverage for occupational diseases is limited to those that arise out of and in the course of employment. Chicken pox is not an occupational disease because it is not peculiar to the employment.
Which one of the following individuals is likely to have a valid workers compensation claim? A) Retired employee injured while visiting his old workplace. B) Employee who suffers a diabetic coma from failure to take prescribed medicine. C) Sole proprietor injured in an auto accident while driving to a friend's house. D) Employee injured while performing a task for which he had not yet been trained.
Answer: D First, to be covered an injury must occur on the job or arise out of the employee's work. Therefore, neither the claim of the retired employee or the sole proprietor would be covered. Second, negligence is not an issue. To qualify for workers compensation, an employee must have experienced a work-related injury, and, while the definition of work-related has been considerably broadened over the years, failure to take prescribed medication would not be considered an accident unless the job interfered with the employee's ability to take it.
Workers' compensation laws vary from state to state. The categories of coverage are elective or compulsory. In compulsory states the basic methods of providing coverage are monopolistic or competitive. The monopolistic method is when the insurance: A) may be purchased from the state-run insurer. B) must be purchased from a company approved by the state's Insurance Department. C) may be purchased from a company approved by the state's Insurance Department. D) must be purchased from the state-run insurer.
Answer: D In a monopolistic state the coverage must be purchased from the state-run insurer. The 5 monopolistic states are North Dakota, Ohio, Washington, West Virginia, and Wyoming.
Bob's TV store needs workers' compensation coverage for his employees. He could purchase coverage from all of the following sources EXCEPT: A) an assigned risk plan. B) an insurance company that writes workers' compensation. C) the state if it is monopolistic. D) self-insurance.
Answer: D Self-insurance is simply the retention of risk. The company sets aside funds to meet projected losses rather than purchase coverage elsewhere. If the company is not able to demonstrate to the state that it has the financial resources to cover losses, the state will require that the company purchase insurance.
What is the benefit for the employee covered by either the Federal Employers Liability Act or the U.S. Longshoremen's and Harbor Workers' Compensation Act? A) There is no advantage to these employees because these terms simply describe how coverage is purchased for the exposures that they have. B) Federal law requires eligible companies to purchase this coverage. C) The benefits are the same as for workers' compensation, but federal law requires coverage to be purchased here. D) The benefits are broader than workers' compensation coverage.
Answer: D The benefits are broader than for workers' compensation coverage. For example, the Federal Employers Liability Act allows injured workers to sue employers for negligence, and the employers cannot use certain common-law defenses.
Which one of the following statements regarding workers compensation laws is CORRECT? A) An injured worker must prove negligence on the part of the employer. B) Workers compensation is governed at the federal level. C) Workers compensation is optional. D) Benefits are paid to workers injured on the job regardless of who is at fault.
Answer: D Workers compensation benefits are paid to workers who suffer job-related injuries or diseases without consideration of fault or negligence. Workers compensation is regulated at the state level. All states but Texas have compulsory workers compensation laws. In these states, every employer must provide the benefits and amounts stipulated in the laws or face penalties for noncompliance.
