Workers Compensation and Employers Liability Insurance
Aggregate Excess
(also known as stop loss insurance) is insurance that covers losses only after the insured has retained a stated amount of aggregate loss during the policy period
Additional Common Characteristics of Workers Compensation
-Extraterritorial provisions -Federal Jurisdiction -Methods for meeting employers' obligations
Employers Liability Exclusions
-Statutory Obligations -Injury Outside the United States or Canada -Liability Assumes Under Contract -Employment Practices -Other Exclusion *punitive damages for injury or death of any illegally employed person * Bodily injury to employees employed in violation of the law with the knowledge of the insured or any executive officers of the insured * Bodily Injury intentionally caused by the insured * Fines or penalties imposed for violation of federal or state law
Statutory Obligations
-any workers compensation, occupational disease, unemployment compensation, or disability benefits law -the United States Longhsore and Harbor Workers' Compensation Act (LHWCA) -The Federal Employers Liability Act -Damages payable under the Migrant and Seasonal Agricultural Worker Protection Act -Any other federal workers compensation or occupational disease law
Limits of Liability
3 limits that apply to employers liability coverage: -the bodily injury by accident limit is the most that insurer will pay for bodily injury resulting from any one accident, regardless of the number of employees injured -the bodily injury by disease--policy limit is the most that the insurer will pay for bodily injury by disease, regardless of the number of employees who sustain disease -the bodily injury by disease--each employee limit is the most that the insurer will pay or bodily injury by disease to any one employee
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 members) to sue their employer for damages due to the employer's negligence
Assigned Risk Plans
An employer rejected by private insurers can apply to be assigned risk plan in the appropriate state to obtain coverage. in a typical assigned risk plan, the state will "assign" each applicant (rejected first by the voluntary market) to be insured by a private insurer. The private insurers are compelled to accept assigned risk policies in a quantity that is proportionate to their share of voluntary market. Assigned risk plans are also known as the involuntary market
Workers Compensation and Employers Liability Insurance Policy--Endorsements
Common endorsements to the WC&EL policy include voluntary compensation coverage (providing workers compensation benefits for employees not subject to a workers compensation law) and LHWCA coverage
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 workers compensation policies
Occupational Disease
Disease thought to be caused by work or the work environment.
Dividend Plans
Dividends are a return to the insured of a portion of the premiums paid for an expiring policy term. Two general types of dividend plans are available: a flat-dividend plan and a sliding-scale dividend plan: -flat-dividend plan, all eligible policies receive the same percentage of their premium as a dividend regardless of their individual loss experience -Under a sliding-scale dividend plan, the size of the dividend varies with the insured's own experience; the lower the insured's loss ratio, the higher the dividend percentage dividends are paid after expiration of the policy and then only at the rate declared by the insurer's board of directors
WC&EL Policy--Other States Insurance
Employers need additional workers compensation and employers liability coverage if they expand their operation into states not listed in Item 3.A of the Information Page... this action is called Other States Insurance
Voluntary Compensation and Employers Liability Coverage Endorsement
Endorsement that amends the WC&EL policy to cover employees who are not subject to a workers compensation statute. The additional coverage, Voluntary Compensation, does not make employees subject to the workers compensation law, but it obligates the insurer 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 workers compensation law designated in the endorsement 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 endorsement
Self-Insured Groups
In some states, employers may join with one another to form self-insured groups (also known as pools or trusts) to provide members with workers compensation insurance. Self-insured groups consist of employers in the same industry that jointly (as a whole) and severally (individually) guarantee payments of workers compensation benefits to the employees of the group's members
Rate Deviations
In some states,insurers are permitted to apply a rate deviation factor to the premium as calculated by the rating manual
Methods for Meeting Employers' Obligations
Most workers compensation statutes require employers to demonstrate financial ability to pay any claim that may arise. Several methods are available to meet this obligation, although not every state allows all of these methods: -voluntary insurance -assigned risk plans -state funds or employers mutual insurance companies -qualified self-insurance plans -self-insured groups
Classifications
Rates for workers compensation insurance vary considerably according to the classification of workers. The class rating system serves to identify groups of similar employments, in terms of risk of injury or disease, whose experience is then combined for the purpose of establishing rates
Rehabilitation Benefits
Rehabilitation of injured workers is a goal of the workers compenstation system, most state laws include some rehabilitation benefits. The primary rehabilitation benefit required is the payment of expenses for complete medical treatment and medical rehabilitation most workers compensation laws provide a maintenance allowance of injured workers during rehabilitation in addition to other compensation benefits often, rehabilitation can reduce the cost of a workers compensation claim by shortening the length of time that the injured employee is disabled.
Part One-Workers Compensation Insurance
The coverage provided by Part One obligates the insurer to pay all compensation and other benefits required of the insured by the workers compensation law or occupational disease law of any state listed in Item 3.A of the Information page
Audits
The final premium is determined by audit. the insured must keep records of information needed to compute the policy premium and provide such records to the insurer when requested
Premium Base
With only a few exceptions, the premium base for workers compensation insurance in remuneration (that is, payroll). Payroll serves as an effective premium base because it varies directly with the exposure covered by the insurance, it is relatively easy to determine and verify from available records, and it is not readily subejct to manipulation by the insured
Common Caharacteristics of Workers Compensation
Workers compensation statutes differ by state but share several common characteristics, including these: -basic purpose -benefits provided -persons and employments covered
Permanent Partial Disability
a disability caused by a work-related injury or disease that impairs the injured employee's earning capacity for life. The employee is able to work at reduced efficiency
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
Permanent Total Disability
a disbaility caused by a work-related injury or disease that renders an injured employee unable to ever return to gainful employment
Monopolistic StateFund (Exclusive state fund)
a facility, owned and operated by a state government, that provides workers compensation insurance and that does not permit any other insurers to sell workers compensation insurance in that state. Puerto Rico, The U.S. Virgin Islands, and four states (North Dakota, Ohio, Washington, and Wyoming) require all workers compensation insurance to be purchased from the state or territorial fund
United States Longshore and Harbor Workers; Compensation Act (LHWCA)
a federal statute that eliminates the right of most maritime workers (other than crew members of vessels) to sue their employers and, in return, requires such employers to provide injured or ill workers with benefits like those provided by state workers compensation statutes
Expense Constant
a flat charge designed to cover administrative expenses, such as those for policy issuance and record keeping that are common to all policies. it is applied regardless of the size of the policy premium. Not every state calls for application of expense constant
Employers mutual insurance company
a mutual insurer established by a state's legislature to write workers compensation insurance for any qualified employer in the state
Retrospective Rating
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 Funds
a state fund that sells workers compensation with private insurers
Deductible plans
allows the insured to self-insure most of its workers compensation claims without establishing a qualifying self-insurance plan. They greatly reduce the premium and are available in most states
Qualified Self-Insurance Plans
almost all states allow employers to retain (self-insure) the risk of workers compensation losses if they demonstrate the financial capacity to do so by meeting certain requirements. to qualify as a self-insurer, an employer must post a surety bond with the workers compensation administrative agency of the state to guarentee the security of benefit of payments self-insurance is usually practical only for employers with a large number of employees in a given state
Employement Practices
also does not apply to damages arising out of employment practices, including (but not limited to) demotion, evaluation, harassment, discrimination, and termination
Experience Rating
an experience rating plan increases or reduced the premium for a future period based on the insured's own loss experience for a period in the recent past. The past period is usually the three-year period that began four years before policy inception
Liability Assumed Under Contract
does not apply to liability assumed under contract--even if the insured has asusmed another party's liability for injury to the insured's own employee. The Commercial General Liability (CGL) Coverage Form, by way of an exception to the employers liability exclusions in that form, covers the insured agaisnt liability assumed under an insured contract for injury to an employee of the insured
Injury Outside the United States or Canada
employers liability coverage does not apply to bodily injury that occurs outside the United States, its territories or possessions, and Canada
Part Two-Employers Liability Insurance
employers liability insurance protects employers against liability claims by employees for occupational injuries that are not covered by the state's workers compensation statute The insurer agrees to pay damages that the insured becomes legally obligated to pay because of bodily injury to an employee
Medical Benefits
in most instances, the workers compensation law provides full and unlimited medical expense benefits for a covered injury or disease. These benefits inclue medical, hospital, surgical, and other related medical care costs, including physical therapy and prosthetic devices
Death Benefits
include a flat rate amount for burial expense and partial replacement of the worker's former weekly wage. The burial expense allowance varies among the states
Specific Excess Insurance
insurance that covers loss due to a single occurence only for the amount that exceeds the policy retention.
Disability Income Benefits
intended to compensate an injured employee for wage loss in any of these categories (Temporary Partial Disability; Temporary Total Disability; Permanent Partial Disability; Permanent Total Disability; Disability Income Benefits). These benefits are payable subject to a deductible in the form of a waiting period. Disability benefits do not begin until the waiting period (varies from 3 to 7 days) has expired
State Funds and Employers Mutual Insurance Companies
legislation in a handful of other states have created employers mutual insurance companies that also accept virtually all applicants but, unlike state fund, are not controlled by the state
Merit or Schedule Rating Factors
premium can also be modified by a merit or schedule rating factor to give the insured credit for conditions that are more favorable than those normally expected, such as superior housekeeping (standards that foster workplace safety), excellent employee training, and on-site medical facilities
Workers Compensation and Employment Liability Insurance Policy (WC&EL Policy)
primarily covers employer's obligation to pay benefits required by workers compensation statutes but also protect the employer against claims or suits for bodily injury to an employee when the workers compensation statute does not eliminate the right to sue the employer The standard WC&EL policy form includes a brief General Section and these 6 parts: -Part One: Workers Compensation Insurance -Part Two: Employers Liability Insurance -Part Three: Other States Insurance -Part Four: Your Duties If Injury Occurs -Part Five: Premium -Part Six: Conditions
Benefits Provided (of Workers Comp)
provide benefits for medical expenses and wage loss resulting from either occupational injury or occupational disease benefits payable under various state workers compensation laws generally include medical benefits, disability income benefits, rehabilitation benefits, and death benefits
Extraterritorial provisions
provide that empoyees can receive benefits provided by law of the state in which they are hired even if the accident occurs in another state... even covered if working outside the US (as long as they haven't been out of the US for longer than the time limit specified [30 days-6months] in the applicable law)
Premiun Discount
provides an increasing credit for premiums in excess of a certain minimum
Voluntary Insurance
purchasing insurance from a private insurer licensed to write workers compensation coverage in the state the insurer is free to select its insureds and voluntarily offers to provide the needed coverage
LHWCA Coverage Endorsement
the endorsement amends the definition of workers compensation law to include the LHWCA with respect to operations in any state designated in the endorsement's schedule
Premium Adjustments
the premium, determined by applying the rate to the exposure (payroll) for each classification, can be modified by any of several adjustments
Basic Purpose (of Workers Comp)
these laws provide no-fault protection by removing the right of employees to sue their employers for injuries covered by the applicable workers compensation statue while obligating employers to compensate injured employees even if employer negligence is not involved in return for definite payment, the employer's liability is limited (but not eliminated) by statue. Recovery under the applicable workers compensation law is thus often called the employee's "exclusive remedy" against the employer The workers compensation system effectively guarantees injured workers prompt payment while reducing costs and court workloads arising out of litigation
Rating Workers Compensation Insurance
workers compensation premium reflects these two factors because the premium depends on the amount of the employer's payroll (premium basis) and the type of business (classifications) involved
