Ch.14 - Workers' Compensation Insurance
Compulsory
In jurisdictions where workers' compensation benefits are mandated by state law, employers are required to provide workers' compensation benefits to their employees - either via insurance or self-insurance. If the provisions of a policy do not comply with the state law, the insurer is required to provide all legally mandated benefits.
Sole
Owners, Partners, and Corporate Officers.
Sole Representative
The First Named Insured will act on behalf of all insureds, receive any cancellation notice, and unearned premium.
Medical Benefits
Unlimited coverage for all necessary medical (including hospital) expenses related to the covered injury that occurred during the policy period.
Contributory negligence
Used to argue that the employee was partially at fault and therefore was not eligible to recover benefits from the employer
Competitive States
Workers' Compensation insurance is available through private insurers as well as any state fund that may exist.
Which of the following is the sole representative under the policy? a. Employer and his partners b. Named Insured c. First Named Insured d. Company legal representative
c. First Named Insured [The First Named Insured will receive any cancellation notice and receive any unearned premium.]
Which disability income benefit covers an injury that allows an employee to do some work, but is unable to earn his or her usual wage until full recovery? a. Temporary Total b. Permanent Partial c. Temporary Partial d. Scheduled Injury
c. Temporary Partial [Temporary Partial benefits are generally calculated as a percentage of the difference in wages]
Which type of regulatory environment permits Workers' Compensation benefits only through a state fund? a. Compulsory b. Competitive c. Elective d. Monopolistic
d. Monopolistic [Monopolistic Workers' Compensation insurance is only available through a state fund.]
Physical therapy and vocational training are two examples of what kind of benefits? a. Disability benefits b. Death and survivor benefits c. Medical benefits d. Rehabilitation benefits
d. Rehabilitation benefits [Physical therapy and vocational training are utilized with the objective of returning the injured employee to work as soon as possible.]
Which coverage is not included in a Workers' Compensation policy? a. Employer's liability b. Medical benefits c. Disability income benefits d. Second injury fund
d. Second injury fund [The Second Injury Fund pays that portion of the loss attributed to the prior disabling injury. The purpose of the fund is to relieve an employer of the portion of claims related to prior injuries that are simply made worse by the employee's current work. This is part of the policy but something provided on a state-by-state basis.]
Prior to Workers Compensation, employers used what three common law defenses to avoid paying claims?
1. Assumption of risk 2. Fellow servant rule 3. Contributory negligence
Occupational Disease
A disease that must arise out of the course of employment and be caused by conditions that are particular to that employment. (Example: a coal miner who develops respiratory problems/black lunge)
Scheduled Benefits
A schedule of benefits applies to specific permanent partial injuries, such as a dollar amount for the loss of an eye, or a hand. These benefits are usually paid in addition to other benefits
Death and Survivor Benefits (Funeral Expense Benefit)
A statutory maximum amount, varying from state to state, is provided as a burial allowance. Survivor income benefits are a percentage of the deceased worker's wages and are also provided to the surviving spouse (and usually end at remarriage); and/or children (until age 18, and sometimes longer if a full-time student).
Temporary Partial
An injury after which an employee is able to do some work, but is unable to earn his/her usual wage until full recovery. Benefits are usually calculated as a percentage of the difference in the wages.
Permanent Partial
An injury after which an employee is able to do some work, but will never fully recover. An employee can still earn a wage, but not as much as he/she would have earned if the injury had not occurred.
Permanent Total
An injury that prevents an employee from being able to do any work for the rest of his/her life. Benefits are subject to the same weekly benefit percentage and the same minimum and maximum limits as Temporary Total. In most states, benefits are paid for life.
Temporary Total
An injury, from which an employee is expected to recover and return to work, but is unable to do any work while recovering. Benefits begin after a waiting period of several days. Retroactive benefits will be paid back to the initial date of disability if the disability lasts beyond a certain period. The benefit amount is a percentage of the employee's average weekly wage, subject to minimum and maximum limits. In most states, it is 66 2/3%.
The Federal Employees Compensation Act
Applies additional workers compensation regulations to all U.S. civilian employees.
The Federal Employers Liability Act (FELA)
Applies additional workers compensation regulations to interstate railroad workers.
The Jones Act (AKA: Merchant Marine Act of 1920)
Applies additional workers compensation regulations to sailors injured by the negligence of others.
Defense Base Act
Applies additional workers compensation regulations to workers on military bases outside the United States.
The U.S. Longshoremen and Harbor Workers' Compensation Act
Applies additional workers compensation regulations to workers who load, unload, build, or repair ships (but not to the crew of the ship).
Workers Compensation
Employer held insurance that provides a payment of benefits to employees for injuries that arise out of their employment. In addition, it helps protect employers from lawsuits since injured workers are not permitted to sue an employer for injuries if covered by workers' compensation insurance.
Elective
In jurisdictions where workers' compensation benefits are not mandated by state law, employers have the choice to accept or reject state workers' compensation laws. If an employer chooses to reject the workers' compensation laws and an employee is injured, the employee may then file a claim or lawsuit against the employer for injuries; and the employer is denied the use of common law defenses, such as assumption of risk, contributory negligence, and negligence of a fellow employee.
Independent Contractors
Independent Contractors - Plumbers, electricians, and landscapers who work under contract for more than one employer. The definition of independent contractor varies by state, as do requirements for workers' compensation and exempt status.
Rehabilitation Benefits
Physical therapy and vocational training are utilized with the objective of returning the injured employee to work as soon as possible.
Fellow servant rule
Removed the employer's negligence if a fellow employee contributed in any way to the loss
Assumption of risk
This defense placed all the risk on the employee as being responsible for knowing the work conditions prior to employment
Casual laborers
Those whose work is non-recurring or irregular.
Monopolistic States
Workers' Compensation insurance is only available through a state fund.
Which statement is true regarding the Workers' Compensation Assigned Risk Plan? a. Any employer who is unable to purchase coverage in the voluntary market can obtain coverage in the Assigned Risk Plan b. It is used exclusively for Voluntary Workers' Compensation Insurance c. It is reserved for those employers who have better-than-average loss experience d. It provides more limited benefits than those provided by the voluntary insurance programs
a. Any employer who is unable to purchase coverage in the voluntary market can obtain coverage in the Assigned Risk Plan [The Workers' Compensation Assigned Risk Plan is available to those employers who cannot obtain coverage in the voluntary market because of their loss experience or the hazardous nature of their employment.]
If an employer cannot obtain Workers' Compensation coverage for his employees, which of the following is an alternative? a. Assigned Risk Plan b. Workers' Compensation Fund c. State Claim Fund d. Surety Fund
a. Assigned Risk Plan [This state Plan offers Workers' Compensation coverage for employers who are unable to purchase coverage in the voluntary market, and all authorized Workers' Compensation insurers in the state must participate in the Plan.]
Each of the following is an exempt worker under Workers' Compensation statutes, except: a. Employee in a company of 100 employees b. Sole proprietor c. Independent contractor d. Farm laborer
a. Employee in a company of 100 employees [Some states exempt workers of employers with fewer than three employees.]
Employers Liability Insurance is designed to do all of the following, except: a. Extend policy benefits to states not listed on the Declarations page b. Protect the employer against common law claims c. Cover claims that are not subject to compensation laws d. Fill in gaps of compensation coverage
a. Extend policy benefits to states not listed on the Declarations page [Part II does not extend the coverage to other states. Other States Insurance is provided by Part II of the policy.]
Which of the following is true of Employers Liability insurance? a. It covers actions brought against the insured in a capacity other than as an employer b. It covers employees only if working in a state not listed on the information page c. It covers only executive officers d. It is excess coverage over Workers' Compensation benefits
a. It covers actions brought against the insured in a capacity other than as an employer [Employers Liability covers actions brought against the insured in a capacity other than as an employer, such as consequential injury.]
Employees exempted from Workers' Compensation laws include all of the following, except: a. Part-time employees b. Independent contractors c. Casual workers d. Farm laborers
a. Part-time employees [Part-time status is not an exemption from coverage under Workers' Compensation laws.]
Which of the following is not an element of a temporary total disability? a. The employee can work while recovering b. The length of the disability must exceed the waiting period c. The employee is expected to return to work d. Retroactive benefits will be paid if disability exceeds the waiting period
a. The employee can work while recovering [An employee with a temporary total disability would be unable to do any work.]
Employers Liability applies under which of the following circumstances: a. The employee is allowed to sue the employer for negligence b. Liability is assumed under a contract. c. Punitive damages awarded because an employee was employed in violation of law d. An obligation imposed by a Disability Benefits law
a. The employee is allowed to sue the employer for negligence [Employer's Liability provides insurance for bodily injury and other damages for which the insured is liable outside of workers' compensation and the employee is permitted by law to sue the insured for negligence.]
All of the following are true about temporary partial disability benefits, except: a. The employee will never return to his/her original wage level b. Benefits are calculated as a percentage of the difference in the wages c. The employee is able to do some work d. The employee's wages during the period of disability are less than before the injury
a. The employee will never return to his/her original wage level [After a temporary partial disability, it is expected that the employee will return to the same job after recovery.]
An injury would not be covered by Workers' Compensation under which of the following circumstances? a. The injury occurs on the way to work b. A worker is injured during assigned hours c. The risk causing the injury is employment-related d. The injury occurs while a worker is performing his work duties
a. The injury occurs on the way to work [The injury must occur while the employee is at work or working.]
All of the following are covered injuries occuring during the course of employment except: a. Injury must occur while the employee is at work b. Injury occurs while the employee is playing in a company softball game c. The employee is performing regular job duties d. Illness is contracted on the job
b. Injury occurs while the employee is playing in a company softball game [While it is a company game, it does not occur while working, performing the assigned jobs, during the designated work hours, and it is not reasonably related to employment.]
Which statement is true regarding the Employers Liability Insurance Part of Workers' Compensation? a. It includes employees as additional insureds b. It provides coverage for employment-related liability outside of Workers' Compensation statute c. It is optional coverage not needed by most employers d. It provides coverage for a worker injured in a state that is not listed on the Declarations
b. It provides coverage for employment-related liability outside of Workers' Compensation statute [Employers Liability covers suits for injuries and their consequences that are not covered by Workers' Compensation.]
Which of the following Workers' Compensation programs applies to sailors injured due to the negligence of others? a. Federal Employer's Liability Act b. Jones Act c. Harbor Workers' Compensation Act d. Defense Base Act
b. Jones Act [FELA applies to interstate railroad workers, the Harbor Workers' Act applies to workers who load, unload, build or repair ships, and the Defense Base Act applies to workers on military bases outside the United States.]
Under Workers' Compensation insurance, the insured is responsible for paying benefits for: a. Taxes on litigation b. Knowingly hiring an employee in violation of the employment law c. Appeal bond premiums d. When the insured incurs expenses requested by the insurer
b. Knowingly hiring an employee in violation of the employment law [The insured must also pay because of his serious or willful misconduct, failure to comply with safety regulations, or discrimination.]
An insurer will not pay which of the following in the event of a Workers' Compensation claim? a. Claim expenses b. Loss of insured's earnings because the insurer requested the insured come to court c. Premiums for appeal bonds d. Defense costs
b. Loss of insured's earnings because the insurer requested the insured come to court [The Insurer will pay expenses incurred by the insured, at the request of the insurer, but not loss of earnings.]
Which of the following Workers' Compensation benefits do not have a monetary limit? a. Scheduled injuries b. Medical benefits c. Death and survivor benefits d. Disability benefits
b. Medical benefits [Medical benefits are unlimited in most states. Other items have either dollar or percentage limits.]
All of the following statements regarding a Workers' Compensation policy are correct, except: a. Under a Workers' Compensation Policy, a partial disability affects earning capacity but does not indicate a total inability to work b. Part Two of a Workers' Compensation Policy provides unlimited coverage c. Under the Workers' Compensation Policy, survivor income benefits are a percentage of the deceased worker's wages d. Part Three of a Workers' Compensation Policy includes Other States Insurance
b. Part Two of a Workers' Compensation Policy provides unlimited coverage [Part Two of a Workers' Compensation policy provides Employers Liability coverage, which is subject to limits, unlike the medical benefits provided under part one of the policy.]
Which of the following Federal Workers' Compensation Laws applies to ship workers that load, unload, build and repair ships? a. The Federal Employers Liability Act b. The U.S. Longshoremen and Harbor Workers' Compensation Act c. The Jones Act d. The U.S. Contributory Liability Act
b. The U.S. Longshoremen and Harbor Workers' [The only coverage available for workers who load, unload, build and repair ships is the U.S. Longshoremen and Harbor Workers' Compensation Act.]
Under most states' Workers' Compensation laws, medical benefits are: a. Limited to $100,000, for all employees per year b. Unlimited c. Limited to $100,000, per employee per year d. Limited to $500,000, aggregate for all accidents
b. Unlimited [Generally, the medical benefits under Workers' Compensation are unlimited.]
Which statement is false regarding Workers' Compensation? a. Some types of work are not covered b. A covered injury must be reasonably related to employment c. Employees may elect not to be covered at policy inception or renewal d. A covered injury must occur while the employee is at work or working
c. Employees may elect not to be covered at policy inception or renewal [Workers' Compensation is the sole remedy for work related injuries. An employee cannot elect not to be covered.]
Temporary Total Disability may be described as: a. Any disability that extends beyond 60 days b. Preventing return to the employee's former occupation c. Inability to return to any employment while recovering d. Allowing no possible improvement
c. Inability to return to any employment while recovering [Temporary Total Disability indicates the inability to return to any employment while recovering.]
Which of the following must participate in the Workers' Compensation Assigned Risk Plan? a. All insurers authorized to do business in the state b. All domestic insurers in the state c. Insurers that are authorized to write Workers' Compensation in the voluntary market d. Insurers that write Workers' Compensation insurance exclusively
c. Insurers that are authorized to write Workers' Compensation in the voluntary market [Because the Workers' Compensation Assigned Risk Plan provides coverage for those employers unable to obtain voluntary coverage due to their prior loss experience or the hazardous nature of their operations, all companies that write Workers' Compensation coverage in the voluntary market are required to participate. Risks are apportioned among insurers in relation to market share.]
All of the following statements regarding the Voluntary Compensation endorsement is correct, except: a. The state of employment must be provided b. The class of employees to be covered must be provided c. It exempts employers from state Workers' Compensation law. d. The employees must waive their right to sue and accept coverage under the endorsement
c. It exempts employers from state Workers' Compensation law. [This endorsement is used when an employer wishes to provide Workers' Compensation benefits to employees, although the law does not require the employer to provide coverage.]
Which of the following is true about the Assigned Risk Plan? a. It is intended for employers who have high claims volume b. Private insurers compete with the Assigned Risk Plan c. It is intended for employers who are unable to purchase in the voluntary market d. Insurers with income over $10 million can opt out of participating in the Plan
c. It is intended for employers who are unable to purchase in the voluntary market [Typically, insurers who write Workers' Compensation Insurance in the voluntary market in the state must participate in the Assigned Risk Plan.]
Private Insurers are not allowed to write Workers' Compensation Insurance in which of the following states? a. Voluntary b. Competitive c. Monopolistic d. Compulsory
c. Monopolistic [Monopolistic States are states that provide Workers' Compensation benefits only through a state fund. These states do not allow private insurers to compete with the state fund.]
Which of the following types of Workers' Compensation laws is available through a state fund? a. Compulsory b. Elective c. Monopolistic d. Competitive
c. Monopolistic [The Monopolistic law is only available through a state fund, and the Elective version allows employers to accept or reject the state Workers' Compensation law.]
The Workers' Compensation policy's guidelines for providing other state coverage do not include which requirement? a. If the insured begins work in a covered state after the effective date of the policy the other in force insurance, if any, applies b. The insurer must reimburse the insured for any payments the insurer is not allowed to pay c. Monopolistic states may be listed on the information page d. The insured must notify the insurer within 30 days when entering a state not listed on the policy
c. Monopolistic states may be listed on the information page [Employers with operations in the monopolistic states must purchase coverage directly from the state entity that sells this coverage]
The type of disability of an employee unable to work with no possibility of improvement is called: a. Temporary Total b. Permanent Partial c. Permanent Total d. Temporary Partial
c. Permanent Total [Permanent Total refers to total disabilities where no improvement is possible.]
A disability that prevents an employee from continuing the job he/she held when injured, but not from doing any work at all, and from which the employee is not expected to recover is known as a: a. Temporary partial disability b. Permanent total disability c. Permanent partial disability d. Temporary total disability
c. Permanent partial disability [A temporary partial disability arises out of an injury which renders an employee able to do some work, but unable to earn his/her usual wage until full recovery.]
Under which section of the Workers' Compensation and Employers Liability policy would the insured's duties be found? a. Section II b. Section I c. Section IV d. Section III
c. Section IV [The insured's duties if injury occurs are listed in Section IV, and include the following: Provide for immediate medical services required by law; Give the insurer the names and addresses of the injured persons and any witnesses; Promptly forward all notices, demands, and legal papers related to the injury to the insurer; Cooperate with the insurer's investigation; Do not interfere with the insurer's subrogation rights; and Do not voluntarily make any payments, assume obligations, or incur expenses.]
Which statement is false regarding Workers' Compensation? a. Payment is made without regard to negligence b. It pays medical expenses, loss of time benefits and death benefits c. The premium is paid by the employee d. It covers investigation and defense costs
c. The premium is paid by the employee [The cost of the Workers' Compensation program is paid by the employer.]
Which statement is the primary objective of Workers' Compensation? a. To improve the employee's working conditions b. To improve employer and employee relations c. To provide a payment of benefits to employees for injuries that arise out of their employment d. To provide accident coverage for employees both on and off the job
c. To provide a payment of benefits to employees for injuries that arise out of their employment [Workers' Compensation provides benefits to workers injured on the job without regard to fault.]
When an employee is injured by a product manufactured by the employer, the Employers Liability will provide coverage under which of the following? a. Third Party Over claim b. consequential Injury Fund c. Loss of Services d. Doctrine of Dual Capacity
d. Doctrine of Dual Capacity [Doctrine of Dual Capacity applies when an employee is injured by a product the employer manufactures.]
The Employers Liability pays for all the following for which the insured is legally obligated to pay, except: a. Care and loss of services b. Injuries claimed by a third party as a result of worker's injuries c. Consequential injury to dependents d. Intentional injury by the employee
d. Intentional injury by the employee [Employers must be legally obligated to pay and the employer is also responsible for injuries to employees that arise out of the employment, but claimed against the insured while the insured is in a capacity other than as employer. Intentional injury by the employee is not covered.]
Which is not included in the general section of the Workers' Compensation policy? a. State Workers' Compensation law b. State c. Work locations d. Other insurance
d. Other insurance [The General Section also includes the name of the insured and establishes that the policy is a contract between the employer and the insurer.]
Workers' Compensation provides coverage for all of the following, except: a. Disability income b. Medical expenses c. Death d. Pain and suffering
d. Pain and suffering [Pain and suffering are not covered under Workers' Compensation.]
Which of the following workers would be eligible for Workers' Compensation? a. Casual laborer b. Farm laborer c. Domestic employees d. Part-time worker
d. Part-time worker [Agricultural or farm workers, domestic employees, and casual laborers are common exclusions to eligibility. Part-time workers under an eligible plan must be covered.]
Which of the following is used by an employer who wants to provide workers' compensation benefits even when it is not required? a. Stop-Gap Endorsement b. Secondary Injury Fund c. Other Insurance Endorsement d. Voluntary Compensation Endorsement
d. Voluntary Compensation Endorsement [The voluntary compensation endorsement is used when an employer wishes to provide Workers' Compensation benefits to employees, although the law does not require the employer to provide coverage.]
