Chapter 16: Workers' Compensation Insurance

Worker's Compensation and Employers Liability Policy

1. Workers Comp 2. Employers Liability 3. Other States 4. Your Duties if Injury Occurs 5. Premium 6. Conditions

Survivor/Death Burial Allowance

20 times the AWW, available to cover the cost of burial, including incidental expenses, such as transportation of the body. Amounts not used to cover final disposition and funeral expenses are paid into the estate of the deceased worker.

Permanent Partial

A disability that results in a partial loss of earning power or limits the employee's overall capabilities

Care and Loss of Service

A family member may bring action or claim for loss of consortium, i.e. the legal right of one spouse to the company, affection, and service of the other. In addition, the family of the injured employee might bring legal action against the employer for emotional damages the family suffers.

National Council on Compensation Insurance (NCCI)

A not-for-profit agency owned by member insurers that specializes in insurance rating and data collection relative to workers' compensation issues

Third Party Action Over

A third-party action-over may occur in a work-related accident involving equipment or production machinery.

Temporary Total

A total disability that will last for a short period, after which the employee can return to full employment

Dual Capacity

A workers' compensation policy prohibits an employee from deriving a benefit under workers' compensation and then bringing legal action against the employer as an employee, i.e. Exclusive Benefit Doctrine.

Competitive Carrier-Insured

Allows an employer the choice of purchasing workers' compensation insurance from a state fund or from a private commercial insurer authorized to transact within that state

Contributory Negligence Defense

An employee could not collect for work related injuries if they contributed in any way to the injury

Fellow Servant Rule Defense

An employee could not collect from an employer if the injury resulted from the negligence of a fellow worker

Assumption of Risk Defense

An employee was prohibited from collecting if they has advanced knowledge of inherent dangers associated with a particular occupation

Self Insured Employer

An employer or group of employers that has demonstrated financial capability of meeting immediate and ongoing financial responsibility for employee/survivor claims exposures

Self-Insured Employer Funding

An employer or group of employers that have met the State's criteria and qualifications as a self-insurer

Carrier-Insured Funding

An employer provides workers' compensation coverage with a state accident insurance fund or an insurer authorized to transact workers' compensation insurance within the state

Consequential Bodily Injury

An injury suffered by a spouse, child, parent, or sibling of an injured employee as a direct consequence of the employee's injury may be covered under Employers Liability.

Workers' Compensation

Based on the premise of liability without fault Provides: Medical Disability Income Death/survivor and Rehabilitation benefits

Disability Income Benefits

Benefits are paid retroactively after a short waiting period, typically 2 to 7 days. The disabled employee receives a weekly benefit based on a percentage of the employee's weekly earnings The amount of income benefit payable is based on the degree of disability and the length of time the disability is expected to last There are 4 classifications of disability: Permanent total Temporary Total Permanent Partial Temporary Partial

Medical Benefits

Compensate cost of most medical treatment, most are generally 100%

Permanent Total

Complete and total loss of the ability to perform a gainful or suitable occupation

Part Six

Conditions: Inspections Longterm Policy Transfer of Rights and Duties Cancellation Sole Representative

Longshore and Harbor Workers' Act

Covers certain maritime workers, including most dock workers and maritime workers not otherwise covered by the Jones Act. This Act also extends to stevedoring operations, building or repairing of vessels, new construction work in connection with marinas, etc.

Survivor/Death Dependent Child's Benefit, if No Surviving Spouse

Each child receives a monthly benefit equal to 4.35 times 25% of the AWW until reaching age 18, unless the child's entitlement exceeds age 18. In the event the dependent child is a full time high school student, benefits are extended until the child reaches age 19

Compulsory Workers' Compensation Laws

Employer is required to carry Workers' Compensation insurance and comply with all of the provisions of the law

Elective Workers' Compensation Laws

Employer may choose not to be a workers' compensation subject employer If an employer in an elective state chooses to reject workers' compensation law and an employee brings suit against that employer alleging negligence, the employer is denied the use of the common law doctrines of "assumption of risk", "contributory negligence," and "negligence of a fellow employee."

Part Two

Employers Liability Insurance This provides coverage to the insured for sums the insured becomes legally obligated to pay under common law because of work-related injury or occupational disease. Whether a state is compulsory or elective, workers' compensation laws do not cover all types of employees. The following employment categories are commonly excluded under state workers' compensation laws: Sole proprietors, partners, and executive officers (in some states). Illegally employed workers, e.g. illegal aliens and minors. Domestic workers. Agricultural/farm workers. Casual workers, generally defined as occasional, incidental, or irregular and not related to the employer's usual business. An employer has the option of including excluded categories of employees under the law voluntarily by endorsement to the workers' compensation policy. However, an employee voluntarily covered retains the right to file a common lawsuit against the employer in lieu of workers' compensation benefits. To exercise that right, the employee must expressly reject workers' compensation benefits.

Federal Employers Liability Act (FELA)

Enacted in 1908 by the U.S. congress, makes railroads engaged in interstate, foreign, or territorial commerce responsible for the safety of railway workers. Railroad companies are responsible for worker injuries caused by the railroad's negligence, including equipment failures and errors of other employees of the railroad. In the event of death of a worker because of railroad negligence, damages will be paid to the decedent worker's family Does not award automatically. Unlike state workers' compensation laws, FELA requires the injured worker (or his/her representative) prove that the railroad was legally negligent, at least in part, in causing the injury. After proving negligence, the injured worker is entitled to full compensation and FELA allows for monetary payouts for pain and suffering decided by juries based on "comparative negligence." Because benefits awards are not based on a predetermined schedule, they are many times much greater than state workers' compensation awards.

Admiralty Act (Maritime Law)

For masters or members of a vessel Admiralty law employs the doctrine of maintenance and cure. The obligation to cure requires a shipowner to provide medical care, free of charge, to a seaman injured in the service of the ship. The obligation to cure includes medications and medical devises to improve functionality and may include long-term treatments, e.g. prostheses, wheel chairs and pain medications. The obligation of maintenance requires the shipowner to provide the seaman with his basic living expenses while convalescing. Once a seaman is able to work, he is expected to maintain himself, therefore, may lose the right to maintenance, while the obligation to provide cure may be ongoing.

Survivor/Death Dependent Child's Benefit, Higher Education

If a dependent child is attending higher education or begins attending within 6 months of graduation from high school, benefits will be continued until the child reaches age 23. Dependent benefits stop if and when the child ceases attendance or they graduate, whichever is earlier. To be eligible, the child must be enrolled for at least half time

Other Insurance

If other insurance or self-insurance applies, this insurance will not pay more than its share. Subject to any limits of liability that may apply, all shares will be equal until the loss is paid.

Longterm Policy

If the policy term is longer than one year and sixteen days, all provisions of the policy apply as though a new policy were issued on each annual anniversary that the policy is in force.

Compensable Injury

In order to be considered a compensable injury under Workers' Compensation laws, two basic factors apply (1) the employee must work in a covered occupation and (2) the accident/illness must be job-related. Workers' Compensation laws cover most occupations, however certain workers are excluded; farm workers, domestic workers (residence employees), and casual labor are excluded workers, but an employer may voluntarily cover employees in an exempted class by endorsement to the policy. In addition, workers' subject to other regulatory authority are excluded under state workers' compensation laws, such as railroad workers covered under the Federal Employees Liability Act (FELA), specified public utilities, and maritime employees covered under the Jones Act or federal Longshore and Harbor Workers' Compensation Act.

Exclusions

Liability assumed under a contract. Exception: The exclusion does not apply to a warranty that the insured's work will be done in a workmanlike manner. Punitive or exemplary damages because of bodily injury to an employee employed in violation of the law. Bodily injury to an employee while employed in violation of the law. NOTE: This exclusion applies only if the insured or any of the insured's executive officers had knowledge of the violation. Injury claims that come under workers' compensation laws, occupational disease law, unemployment compensation law, disability law, or any similar laws. These would be paid under Part One. Bodily injury intentionally caused or aggravated by the insured. Bodily injury occurring outside of the United States, its territories or possessions, and Canada. Exception: This exclusion does not apply to a citizen or resident of the United States or Canada who is temporarily outside these countries. Damages arising from the termination of, coercion of, or discrimination against an employee in violation of the law Bodily injury to any person in work subject to federal coverages. Bodily injury to a master or member of the crew of any vessel. Fines or penalties imposed for violation of federal or state law.

Survivor/Death Spouse's Benefits

Monthly benefits are paid in an amount equal to 4.35 times 66-2/3% of the AWW until remarriage. Monthly payments cease at the end of the month of remarriage A surviving spouse caring for dependent children also receives a benefit equal to 4.35 times 10% of the AWW for each dependent child, until the child reaches age 18

Federal Coverages

Most workers are subject only to state workers' compensation laws, however, others may be subject to: Admiralty Act Jones Act Longshore and Harbor Workers Act Federal Employers Liability Act (FELA)

Workers with Disabilities Program

ORS 656.628 The purpose of this program is to encourage the employment and re-employment of workers with disabilities Any complying employer of a worker who claims or has received compensation, or whose dependents have claimed or received compensation, because of the workers' injury, disease or death, upon application to the Director, if the Director determines: 1. The disability (or impairment) contributed substantially to the workers' death; 2. Any resulting disability was substantially greater by reason of the disability (or impairment); or 3. The injury, disease or death of the worker would not have occurred except for the impairment of the worker with the disability. The reimbursement paid from the Worker's Benefit Fund may not be included in any data used for rate making or individual employer rating. The Director may reimburse the paying agency for compensation amounts in excess of $1,000 per claimant for all subsequent injuries throughout the claimant's working career, paid as a result of the condition.

Compulsory and Competitive State

Oregon is a compulsory-competitive state. Employers are required to carry Workers' Compensation insurance, however an employer may purchase the insurance from a private commercial insurer; the employer is not required to purchase from the state; or the employer may become a self-insurer.

Claim Processing

Oregon requires that an insurer or self-insured employer provide written acceptance or denial of a claim within 60 days after the employer has notice or knowledge of the claim

Part Three

Other States Insurance If the insured is operating in a state other than the insured's resident state, the policy: applies to another state listed on the Information Page; or If the insured begins work in another state not listed after the effective date of the policy and it is not otherwise insured or self-insured for such work, all provisions of the policy apply as if the other state were a listed state. The insurer will reimburse according to the benefits required by the workers' compensation laws of that state if they are not permitted to pay the benefits directly to who is entitled to them. If the insured has work on the effective date of the policy in any state not listed, the insured is required to notify the insurer within 30 days of the effective date

Burial Allowance

Paid in a lump sum, amount is based on a multiple of the employee's weekly earnings

Death/Survivor Benefits

Paid to eligible survivors, there are two types, burial allowance and monthly income benefits Dependent children's benefit is paid until specified age (18) A surviving spouse benefit is paid for life or until they remarry. Upon remarriage, the spouse will receive a lump sum payment to settle the account

Monthly Income Benefit

Paid to the decedent employee's spouse and or dependent children, which is proportion based on the employee's earnings for each family member, subject to max family benefit amounts

Part Five

Premium Workers' Compensation premium is developed on the basis of the employer's payroll. Published manuals contain listings of rate classifications based on the type of work employees perform and their relative exposure to work related injuries. An employer is assigned one or more rate classifications. For each classification, the manual provides a rate per $100 of payroll, the insurer then adds an amount to cover its overhead and an initial premium discount is applied, that varies based on an estimated Merit or Experience Modification Factor

Rehabilitation Benefits

Provided to restore an individual to a position of productive employment. The disabled work may also be compensated for necessary cost associated with rehab like room and board, travel, books and equipment. Most all justifiable expenses will be paid

Monopolistic Carrier-Insured

Requires an employer purchase workers' compensation insurance from the state and does not allow private commercial insurers the opportunity to participate

Statutory Provisions

Statutory provisions are those provisions imposed by law: The insurer is deemed to have notice of an injury when the insured has notice. The default, bankruptcy, or insolvency of the insured or the insured's estate does not relieve the insurer of its duties under the policy. The insurer is directly and primarily liable to any person entitled to the benefits payable by this insurance. Those persons or an agency authorized by law, may enforce the insured's duties. Enforcement may be against the insured and the insurer. Jurisdiction over an insured is considered jurisdiction over the insurer for purposes of the workers compensation law. The insurer is bound by decisions against the insured under that law, subject to the provisions of the policy that are not in conflict with that law. The policy is structured to conform to the parts of the workers compensation law that apply to benefits payable by the insurance, and any special taxes, payments into security, or other special funds and assessments payable by the insurer under that law. Conformity with State Statutes: Terms of the policy that conflict with the workers compensation law are automatically changed to conform to that

Temporary Partial

Temporary limitation in work capabilities that may require the employee be placed on light duty for a specified period

Social Security Offset

The amount of any permanent total disability benefits payable to an injured worker are reduced by the amount of any disability benefits the worker receives from Social Security.

Sole Representative

The insured first named in the Information Page will act on behalf of all insureds to initiate any change, receive return premium, and give or receive notice of cancellation.

Payments the Insured Must Make

The insured is responsible for any payments in excess of the benefits regularly provided by the workers compensation law, including those required because: of the insured's serious or willful misconduct; the insured knowingly employs an employee in violation of law; the insured fails to comply with a health or safety law or regulation; or the insured discharges, coerces or otherwise discriminates against any employee in violation of workers compensation law. If the insurer makes any payments in excess of the benefits regularly provided by workers compensation law on the insured's behalf, the insured is required to promptly reimburse the insurer.

Cancellation

The insured or the insurer may cancel the policy Cancellation by the insured: The insured must mail or deliver advance notice to the insurer stating the effective date of cancellation. Oregon requires that advance notice be given at least 30 days before the effective date of the cancellation, unless the insured provides other insurance or is becoming a self-insured employer, in which case, cancellation will take effect upon the effective date of that insurance. Cancellation by the insurer: The insurer must mail or deliver advance written notice stating when the cancellation is to take effect. Postmarked to the last known mailing address is considered sufficient proof of notice. Oregon requires that advance written notice be mailed to the insured and to the Director (DCBS) stating when cancellation will take effect. Notification by the insurer is as follows: If cancellation is due to the insurer withdrawing coverage for all employers within the insured's premium category, notice of cancellation must be provided at least 90 days before the cancellation effective date. 10 days prior written notification if cancellation is due to nonpayment of premium. Cancellation for any other reason requires 45 days prior written notification.

Transfer of Rights and Duties

The insured's rights or duties under the policy cannot be transferred without the insurer's written consent. Exception: In the event of death of the insured (and the insurer has been notified within 30 days after the death), all rights and duties are transferred to the decedent insured's legal representative.

Limits of Insurance

The insurer agrees to pay those amounts the insured becomes legally obligated to pay up to the Limits of Insurance stated in the policy. An unendorsed policy provides three basic limits of $100,000/$500,000/$100,000 BI by Accident BI by disease - policy limit BI by disease - each employee

Defense Costs

The insurer has the right and the duty to defend (at its expense) any claim, proceeding, or suit brought against the insured for benefits payable under the insurance. However, the insurer retains the right to investigate and settle any of these claims, proceedings, or suits. In addition to other amounts payable as part of any claim, proceeding, or suit the insurer defends, they will also pay: Reasonable expenses incurred by the insured at the insurers request, but not lost earnings; Premiums for bonds to release attachments and for appeal bond amounts up to the amount payable under the policy; Litigation costs taxed against the insured; Post judgment interest; and Any expense incurred by the insurer

Inspections

The insurer retains the right to conduct (but is not obligated to) inspections of the workplace at any time. These inspections are not to be considered safety inspections, they relate only to the insurability of the workplace and the premiums to be charged. The insurer may provide reports relative to conditions found and may recommend changes that help reduce losses, however, the insurer does not warrant the safety of the workplace, the health, or safety of employees or the public.

Average Weekly Wage

The maximum benefit payable, which is determined annually based on the average weekly wage of workers in covered employment during the last calendar quarter of the prior fiscal year The minimum benefit payable is the lesser of $50 per week or 90% of the employee's earnings. The Oregon waiting (or elimination) period is 3 days

Survivor/Death Max Family Benefit

The maximum family benefit payable for a surviving family may not exceed 4.35 times 33-1/3% of the AWW. If the sum of the individual benefits exceeds the maximum, the benefit for each child is reduced proportionately

Disability Income

The weekly benefit payable is equal to 66 2/3% of the employee's earnings, subject to a maximum benefit, which is based on the Average Weekly Wage (AWW)

Self-Insured Status

To be eligible to become a self-insured employer, an employer (or employer group) must demonstrate financial ability to make prompt payment of all compensation and other payments that may become due to the Director and maintain adequate staff qualified to process claims promptly. In order to establish more than one employer (entity) under a self-insured group, each entity must have common majority ownership. In other words, in each entity the same person, or group of persons, or corporation must own a majority interest. This is an important consideration, because if more than one entity is included in the certification as one employer, each entity so included is jointly and severally liable for any compensation and other amounts due, because of claims made against the employer group on behalf of any included entity.

Survivor/Death Remarriage Allowance

Upon remarriage, a surviving spouse will be paid a lump sum payment equal to 36 times the monthly benefit as settlement of the account. Settlement with the surviving spouse does not affect a child's continued entitlement for monthly benefit payment

Modification Factors

When an employer's annual premium is in excess of a stated dollar amount, the employer qualifies for an experience rating, which is based on premiums paid and losses incurred in the prior evaluation period (two years if premium is in excess of $5,000 and three years if the premium is in excess of $2,500, but less than $5,000). When a company has BETTER than average experience, the experience modification will result in a CREDIT (reduction in the insured's final premium), but if the experience is WORSE than average, a DEBIT (surcharge) will apply When an employer is too small to qualify for an experience rating, a merit rating program will apply. In general, this program will: reduce the insured's final premium if there were no payments for lost-time injuries during the most recent year for which data has been compiled; not affect the premium when there was only ONE lost-time injury; and Surcharge the insured's premium when there are two or more lost-time injuries. The maximum merit rating credits or surcharges is 10 percent. The initial premium paid is an estimate based on projected payroll and the type of work, referred to as a deposit premium. At the end of the policy year, a premium audit is accomplished (retrospective rating), where the actual payroll and applicable modification factor are used to determine the final premium.

Exclusive Remedy

Worker's Comp benefits are paid according to a schedule of benefits established by law, and the employee is prohibited from suing the employer as an employee under common law

Part One

Workers Comp The insurer agrees to pay all compensation and other benefits required by Workers' Compensation laws in the state or states where the insured maintains a place of business or operates as listed on the Information Page. The insurance applies to bodily injury by accident and bodily injury by disease, including a resulting death. Bodily injury by accident must occur during the policy period. Bodily injury by disease must be caused by or aggravated by the condition(s) of employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period. There are no dollar limits shown in the policy. The insurer agrees to pay benefits required of the insured according to workers compensation law.

Part Four

Your Duties if Injury Occurs The insured is required to notify the insurer if an injury occurs that may be covered by the policy. The insured must also: Provide immediate medical or other services required by workers compensation law. Provide the insurer with names and addresses of the injured persons and any witnesses, and other information the insurer may need. Promptly forward to the insurer all notices, demands, and legal papers related to the injury, claim, proceeding, or suit. Cooperate with and assist the insurer as they may request in the investigation, settlement, or defense of any claim, proceeding or suit. Do nothing after an injury occurs that would interfere with the right of the insurer to recover from others. The insured is not to voluntarily make payments, assume obligations, or incur expenses, except at the insured's own cost

The Jones Act

regulates maritime commerce in U.S. waters and between U.S. ports, and contains provisions regarding seamen's rights. This Act allows sailors to obtain damages from their employers for claims of unseaworthiness or negligence resulting in bodily injury. An action under this Act may be brought in a U.S. federal court or in a state court, the seaman is entitled to a jury trial. To be considered a "Jones Act seaman," the worker must spend 30% or more of his time in the service of a vessel on navigable waters.