AINS Ch. 9
Explain how premium determined by applying the rates to the exposures (payroll) can be modified by the following work comp and employers liab (WC&EL) premium adjustment: Rate deviations
- Applied to the premium as calculated by the rating manual - Insurers generally reserve these credits for better risks, although competitive pressures sometimes result in avg risks receiving a rate deviation
Sam works as a risk manager for the owner of a commerical building. He has requested and received the Info Page of an electrical contractor's WC&EL policy. Which items on the Info Page will Sam likely check and for what? For the purposes of this question, please do not consider any endorsements.
- Check Item 1 to verify the contractor is the named insured - Check Item 2 to be sure the time is within when the policy is in effect - Check Item 3 to confirm the state is covered - Check Item 4 to see if the contractor's work to be performed is properly described
Explain the basic requirements for an injury or a disease to be covered for work comp benefits
- Injury / disease must arise out of the course of employment (casually related) - Must occur while the employee is engaged in work-related activities
Explain why payroll is an effective premium base for work comp insurance
- It varies directly with the exposure covered by the insurance - It's relatively easy to determine and verify from available records - It's not readily subject to manipulation by the insured
Describe the 3 limits of liability that apply to employers liability coverage
1. Bodily Injury by Accident Limit - most the insurer will pay for bodily injury resulting from ONE accident, REGARDLESS of the number of employees injured 2. Bodily Injury by Disease - Policy Limit - most the insurer will pay for bodily injury from disease, REGARDLESS of the number of employees who get the disease 3. Bodily Injury by Disease - Each Employee Limit - most the insurer will pay for bodily injury by disease to any ONE employee
Name 4 instances that would require an insured to reimburse an insurer for penalties required under a work comp law
1. Willful misconduct 2. Knowingly employing anyone illegal 3. Failure to comply with health and safety laws and regulations 4. Discrimination against employees who claim work comp benefits
Temporary partial disability (TPD)
A disability caused by a work-related injury or disease that temporarily limits the extent to which a worker can perform job duties - the worker is eventually able to return to full duties and hours
Temporary total disability (TTD)
A disability caused by a work-related injury or disease that temporarily renders an injured worker unable to perform any job duties for a period of time
Monopolistic state fund (exclusive state fund)
A facility, owned and operated by a state government, that provides work comp insurances and that does not permit any other insurers to sell work comp insurance in that state
United States Longshore and Harbor Workers' Comp Act (LHWCA)
A federal statute that eliminates the right of most maritime workers (other than crew members of vessels) to sue employers and, in return, requires such employers to provide injured or ill workers with benefits like those provided by state workers comp statutes
Jones Act (United States Merchant Marine Act of 1920)
A federal statute that permits injured members of a vessel's crew (or survivors of a deceased crew member) to sue their employer for damages due to the employer's negligence
Employers mutual insurance company
A mutual insurer established by a state's legislature to write work comp insurance for any qualified employer in the state
Independent contractor
A person (or org) hired to perform services without being subject to the hirer's direction and control regarding work details
Employee
A person hired to perform services for another under the direction and control of the other party, called the employer
Experience modification
A rate multiplier derived from the experience rating computation.
Retrospective rating plan
A rating plan that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period - paid losses or incurred losses may be used to determine loss experience
Competitive state fund
A state fund that sells work comp insurance in competition with private insurers
Workers compensation statute
A statute that obligates employers, regardless of fault, to pay specified medical, disability, rehab, and death benefits for their employees' job-related injuries and diseases
Exceptional Widgets is a small manufacturer with a dozen employees. The owner is considering retain the risk of work comp losses. As an alternative to establishing a qualified self-insurance plan to self-insure her company's work comp losses, the owner of Exceptional Widgets is also considering joining a self-insured group. What can a producer tell the owner about the advantages and disadvantages of a self-insured group?
Advantages: - because they deal directly with their members, their costs for selling and servicing the coverage are lower than for commercial insurers Disadvantges: - in most states they're NOT covered by state guarantee funds - usually have to purchase excess insurance to increase the comfort level of their members and to avoid catastrophically large losses
Explain how the Longshore and Harbor Worker's Comp Act (LHWCA) endorsement amends the definition of work comp law
Amends to include the LHWCA with respect to operations in any state designated in the endorsement's schedule
United States Longshore and Harbor Workers' Compensation Act Endorsement
An endorsement that amends the Work Comp and Employers Liability Insurance Policy to cover the insured's obligations under the US Longshore and Harbor Workers' Comp Act
Large deductible plan
An insurance policy with a per occurrence or per accident deductible of $100,000 or more - these allow an insured to self-insure
Explain why employers need employers liability insurance in addition to work comp insurance
Because depending on laws of the particular state, an employer can still be held liable under the common law as a result of employee injuries, such as third-party claims or claims for care and loss of services
Why is it important for a principal to verify that its independent contractors carry valid work comp insurance on their employees?
Because if an independent contractor does not carry work comp insurance on its employees, the principal for whom the independent contractor is working may be held responsible for providing work comp to employees of the independent contractor
Explain the purpose of stop gap coverage
Because the work comp policies issued by some monopolistic state funds do not include employers liability insurance, many employers buy stop gap coverage to provide this liability coverage
Explain how premium determined by applying the rates to the exposures (payroll) can be modified by the following work comp and employers liab (WC&EL) premium adjustment: Dividend plans
Cost of the insurance can be reduced by dividends declared by the insurer - 2 types: 1. Flat-Dividend Plan: all policies have same % of their premium as a dividend regardless of loss experience 2. Sliding-Scale Dividend Plan: size of the dividend varies with the insured's own experience
Stop gap coverage
Coverage for employers liability that private insurers provide to employers operating in a monopolistic fund state that does not include such insurance in its work comp policies
Occupational disease
Disease thought to be caused by work or the work environment
Voluntary Compensation and Employers Liability Coverage Endorsement
Endorsement that amends the WC&EL policy to cover employees who are not subject to a work comp statute
ID occupations and situations commonly exempted from statutory work comp insurance
Farm labor, domestic employment, and casual labor - in some cases, the law does not apply to employers with fewer than a certain minimum number of employees - work comp laws of some states do not apply to partners, sole proprietors, or exec officers
Briefly explain the types if benefits included under this category: Death benefits
Flat amount for burial expense and partial replacement of the worker's former weekly wage
Briefly explain the types if benefits included under this category: Medical benefits
Full and unlimited medical expense benefits - include medical, hospital, surgical, and other medical care costs - includes PT and prosthetic devices
Explain how premium determined by applying the rates to the exposures (payroll) can be modified by the following work comp and employers liab (WC&EL) premium adjustment: Merit or schedule rating factors
Gives the insured credit for conditions that are more favorable than those normally expected - ex. superior housekeeping, excellent employee training, on-site medical facilities
What is the purpose of the work comp classification system?
IDs groups of similar employments, in terms of risk of injury or disease, whose experience is then combined to establish rates
Fran was attending a training class on behalf of her employer at a professional training center in a bordering state. She had rented a car to get to and from her hotel room and the training center. While driving to the training class, she was rear ended. She suffered injuries requiring medial care and incurred lost wages due to not being able to work for a few weeks. What benefits are payable to Fran under her work comp coverage?
Injuries occurring while traveling to or from work at a fixed location are typically not covered by work comp. Fran was not actually at the training center, she was traveling there, so she would typically not be covered. - BUT she IS covered because she was traveling for her employer wile attending the training conference
Specific excess insurance
Insurance that covers loss due to a single occurrence only for the amount that exceeds the policy retention
Aside from being created by a state legislature, explain how an employers mutual insurance company differs from any other mutual insurer.
It is typically required by its charter to provide work comp insurance to any qualified employer in the state
Describe the info shown in Item 3 of the Info Page in a standard work comp and employers liability (WC&EL) policy
Item 3 summarizes coverage provided by the policy Item 3.A) Lists all states where the insured has operations and insurer has to provide coverage Item 3.B) Shows the limits of liability for bodily injury Item 3.C) Indicates that ins applies to any additional states listed under that item Item 3.D) Lists endorsements and schedules attached to the policy
Kim is a contractor who installs energy-efficient windows. She employs 15 installers. A supplier of a popular brand of windows she installs required her to assume the supplier's liability for injury to her employees. Yesterday, 2 of her installers suffered severe lacerations while installing the supplier's windows. Kim is insured under a WC&EL policy and a Commercial General Liability (CGL) Coverage Form. Explain what coverage Kim has for this incident.
Kim's CGL coverage will cover her against liability assumed under an insured contract for injury to her employees - employers liability coverage of the WC&EL policy does not apply to liability assumed under contract
Briefly explain the types if benefits included under this category: Disability income benefits
Limited to a percentage of the employee's avg weekly wage at the time of disability AND subject to a max and mini weekly benefit amounts - subject to a waiting period deductible - state laws also require compensation for a specific number of weeks for the loss of specific body parts ("scheduled" injuries)
Explain the insurer's payment obligations and legal requirements under Part One of the WC&EL policy
Obligates the insurer to pay all compensation required by the work comp law of any state listed in Item 3.A of the Info Page
Briefly explain the types if benefits included under this category: Rehabilitation benefits
Payment of expenses for complete medical treatment and medical rehab - Vocational Rehab may able be required by law
Explain how premium determined by applying the rates to the exposures (payroll) can be modified by the following work comp and employers liab (WC&EL) premium adjustment: Premium discount
Provides an increasing credit for premiums in excess of a certain minimum (in recognition of the lowered expenses listed below) - expenses of providing work comp insurance do not increase proportionately with increases in premium - percentage paid to produces as a commission is usually reduced as the premium increases
The owners of a bottled water distributor located and insured in a state listed in Item 3.A are considering expanding operations into 3 unlisted states. Explain their responsibilities if they decide to expand operations on the effective date of the policy and how the insurer differentiates between listing the states in Item 3.A or Item 3.C
Stated in Item 3.A if the operations are known to exist in a particular state - the owners must notify the insurer within 30 days of the effective date for coverage to apply Stated in Item 3.C when operations do not currently take place in additional states but could be extended into those states
Joanne is a chemical engineer who works at a large experimental facility that creates ways to improve the stability of plastic explosives, making them safer to transport. One day, Joanne used a mislabeled liquid solution that acted like acid when mixed with the other chemicals in her test tube. Joanne was left with third-degree burns over most of her body. The CEO of the facility withheld the info from the company's insurer, hoping that Joanne would accept his offer to "settle things quietly" to protect the company from an unfavorable public image. A few days later, Joanne died as a result of her injuries. Explain how Part One of the WC&EL policy will protect Joanne's dependents, regardless of the facility's misconduct.
The WC&EL policy provides that the obligations of the insurer will not be affected by the failure of the employer to comply with the policy requirements - therefor, the company's insurer will pay benefits to Joanne's dependents - employees have a direct right of action against the insurer
The owner of West Coast Widget, a small manufacturing company, asked her insurance agent to explain several aspects of West Coast's work comp insurance West Coast Widget received one rating classification for all of its employees, although the work of some employees is more hazardous than that of others. Explain the classification system used in rating work comp insurance.
The classification system IDs groups of similar employments and combines their experience to establish rates - insurer must determine the basic classification that best describes West Coast's business
John is a car mechanic who works in a state listed in Item 3.A of the WC&EL Info Page. He drives to an unlisted state to buy the supplies he needs until his out-of-stock supplies are delivered. John is injured in an auto accident while in the unlisted state. Explain whether Part Two of the WC&EL policy will cover John's injuries.
The injury arose out of employment that was necessary to the insured's work in the listed state, so John will be covered - it is not a requirement that the injury must occur in the states listed
If an insured begins operations in a state designated in Item 3.C of the Info Page in the Work Comp and Employers Liability (WC&EL) Policy, what does the policy require the insured to do for the insurer?
The insured must "Tell us at once if you begin work in any state listed in Item 3.C of the Info Page"
Explain an insurer's obligations regarding compensations with a Voluntary Compensation and Employers Liability Endorsement
The insurer is obligated to pay, on behalf of the insured, an amount equal to the compensation benefits that would be payable to such employees if they were subject to the work comp law designated in the endorsement
Workers Compensation and Employers Liability Insurance Policy (WC&EL policy)
The policy used in most states to provide work comp and employers liability insurance
Steve was employed by a temporary employment agency and was assigned to a dept store during the Christmas shopping season. While lifting a heavy box, he strained his back and required medical care and rehab. He also incurred a month of lost wages. Which employer's work comp policy, if any, will provide benefits for Steve's injury?
The temporary employment agency would provide the work comp benefits to Steve - as a temporary employee, Steve is an employee of the providing firm, not the firm currently using his services
Eric and Lily own Appleberry Farm. To protect their employees in the event of illness or injury, Eric and Lily purchased Voluntary Comp and Employers Liability Endorsement. John, a farmhand, was injured on the tractor while harvesting crops. John sued Appleberry Farm, stating that his complaints about the tractor's faulty emergency brake were ignored by Eric and Lily. Explain how the Voluntary Comp and Employers Liability Endorsement will affect John's lawsuit.
The voluntary compensation endorsement states that if an employee entitled to payment under the endorsement brings a suit under the common law, the coverage provided by the endorsement reverts to employers liability insurance - insurer will defend the insured against the employee's suit and pay any settlement awarded, subject to the stipulated limits of liability
The owner of West Coast Widget, a small manufacturing company, asked her insurance agent to explain several aspects of West Coast's work comp insurance How would experience rating affect West Coast Widget's work comp insurance premium?
Their premium for work comp insurance would be adjusted for a future period based on West Coast's loss experience for a recent period
Why do assigned risk plans for work comp insurance exist?
They exist to make insurance available - some businesses cannot obtain private insurance in the voluntary market because they don't meet insurers' underwriting criteria - an employer rejected by private insurers can apply to the assigned risk plan
If an insurer is licensed to write work comp insurance in all states, explain how the following Item 3.C wording protects the insured: "All states except those listed in Item 3.A and ND, OH, WA, and WY"
This protects the insured if it starts operations in any state other than those listed in Item 3.A, which are already covered, or in any state other the the 4 monopolistic fund states, where it would be illegal for the insurer to provide work comp insurance
ID the employees and types of employment that are frequently excluded from state work comp statutes
Those excluded are employers with fewer than a stipulated number of employees AND certain employments (farm labor, domestic workers, casual employees) - some employees are excluded because alternative plans are provided for them (ex. federal workers) - classes of employment that have alternate plans: federal gov workers, maritime workers, interstate railroad workers Casual Employee: hired for only a short period, usually to accomplish a particular task
Exceptional Widgets is a small manufacturer with a dozen employees. The owner is considering retain the risk of work comp losses. What could a producer tell the owner of Exceptional Widgets about qualifying for self-insurance?
To qualify as a self-insurer, an employer must post a surety bond with the work comp admin agency of the state - in addition, most states require evidence of an ability to administer the benefit payments and services mandated by the law - self insurance is usually practical only for employers with a large number of employees in a given state
The owner of West Coast Widget, a small manufacturing company, asked her insurance agent to explain several aspects of West Coast's work comp insurance West Coast's owner is concerned about the high premium cost of work comp coverage, particularly in light of her employees' excellent safety record. She would prefer to self-insure but is uncertain about performing the admin and claim adjusting functions in-house. Could her producer suggest an alternative?
West Coast is a candidate for work comp large deductible plan; this allows them to self-insure most of its work comp claims without establishing a qualifying self-insurance plan - large deductible plans greatly reduce the premium and are available in most states - w/ lrg deductible plans, the insurer does all the admin work and the insured reimburses the insurer for claim payments up the the deductible amount per occurrence
Contrast work comp coverage with employers liability coverage
Work Comp Coverage: covers an employer's liability under work comp statutes for occupational injury to employees Employers Liability Coverage: covers an employer against liability for an employee's occupational injury that is NOT covered by a work comp statute - subject to monetary limits of liability *Difference is whether the injury is covered under a work comp statute or not
In addition to the state's work comp coverage being time limited outside of the US, what other problem should an insured be aware of?
Work comp laws in the US may not provide coverage for repatriation expense or endemic disease
