The purpose of Workers' Compensation law is to provide benefits for those who suffer an occupational injury or disease.

Covered Injuries

Occupational Injury is one that arises out of and in the course of employment. In the course of employment means that for the injury to be compensable, it must occur when the employee is at work, during the hours in which he is expected to be there, and while he is engaged in the work he is employed to do.

Covered Diseases

Occupational Disease is a disease that arises out of employment and is caused by conditions that are peculiar to that employment. Diseases that can be contracted in other types of employment or in everyday life are not considered occupational diseases.

Workers' Compensation insurance applies under the following criteria:

• The bodily injury must be sustained by an employee included in the group of employees described in the schedule.
• The bodily injury must arise out of and in the course of employment necessary or incidental to work in a state listed in the schedule.
• The bodily injury must occur in the United States, its territories or possessions, or Canada, and may occur elsewhere if the employee is a United States or Canadian citizen temporarily away from those places.
• A bodily injury by accident must occur during the policy period.
• A bodily injury by disease must be caused or aggravated by the conditions of employment. The employee's last day or last exposure to the conditions or aggravating such bodily injury by disease must occur during the policy period.

Medical Benefits

Medical Benefits provide payment for the medical treatment of an injured employee. Most state statutes provide for unlimited medical benefits in both dollar amounts and duration. In those states where limits are imposed, the limits may be exceeded upon the approval of the state's Workers' Compensation administrator.

Disability Benefits

The purpose of disability benefits is to replace the worker's loss of income or earning capacity that results from a compensable injury. There are four classes of disability:

• Temporary Total Disability is the most common type of disability. An employee with a temporary total disability is expected to recover from the injury and return to employment, but is unable to do any type of work while recovering. Most states pay temporary total disability benefits for the duration of the employee's disability, without a limit as to the total amount.
• Permanent Total Disability occurs when an employee suffers an injury that leaves the employee unable to do any kind of work for the remainder of his or her life. As with a temporary total disability, the weekly benefit is a percentage of the worker's weekly wages and is subject to a minimum/maximum weekly payment. The majority of states provide permanent total disability for life.
• Temporary Partial Disability occurs when an employee can still do some work but is unable to earn his or her usual wage until full recovery. Compensation for a temporary partial disability is usually calculated as a percentage of the difference between the weekly wage earned during the recovery period and the weekly wage that would have been earned had no injury taken place.
• Permanent Partial Disability occurs when an employee suffers an injury from which he or she will never fully recover, but the injury is such that the ability to work is only partially affected. In other words, the worker can still do some work, but his or her earning capacity is less than it would have been had no injury occurred.

Most states have developed a list of specific injuries corresponding to benefits used to compensate workers with the more common permanent partial disabilities. These lists of injuries, commonly referred to as scheduled injuries, generally include the loss or loss of use of certain specified body members, such as a hand, an arm, or a leg, and the loss of hearing or eyesight. The benefit levels for scheduled injuries vary from state to state. In 1996, for example, the maximum benefits for loss of a hand ranged from approximately $21,500 in Massachusetts to almost $192,500 in Pennsylvania.

Regardless of the type of disability, all states have a waiting period during which benefits are not payable. Three days is the most common time period. The waiting period acts as a deductible and eliminates the administrative work for small claims. Note that the waiting period applies only to disability benefits. Medical benefits are immediately payable. If the disability lasts beyond a specified number of weeks, usually two or three weeks, retroactive disability benefits will be paid back to the date of the injury.

Rehabilitation Benefits

Provisions are generally made for rehabilitation and rehabilitation-related expenses, such as board, lodging, or travel. While most states specify that such rehabilitation must be funded directly by the employer or its insurer, a number of states have special funds to pay for rehabilitation costs.

Death Benefits

Death benefits are paid if a worker's death arises out of and in the course of employment. These benefits consist of a burial allowance and a weekly income benefit designed to help compensate those dependent on the lost income. These weekly wages of the deceased worker are subject to a maximum and minimum weekly benefit. A time limit often applies to such benefits, with the children's benefits usually ending at age 18 and a spouse's benefits usually ending at remarriage.

Extraterritorial Coverage

Most state Workers' Compensation laws are extraterritorial. This means that an employee hired in a particular state who suffers an occupational injury or disease while outside of its boundaries is still eligible for benefits under that state's Workers' Compensation laws.

In certain circumstances, an employee who is injured in another state has the option of collecting benefits either in the home state or the state where the injury occurred.

Self Insurance Requirement

All state Workers' Compensation laws except those of North Dakota and Wyoming have provisions that permit a private employer to self-insure its Workers' Compensation exposure rather than purchase Workers' Compensation insurance. However, before an employer can begin a self-insurance program for Workers' Compensation in a state, it must meet certain requirements established by the state. For example, most states require the employer to supply a security deposit that is used to cover the employer's Workers' Compensation liabilities should the employer not be able to meet them. In addition, employers are usually required to file a financial statement with the state on an annual basis. Some states also require the self-insurer to purchase excess Workers' Compensation insurance.

Businesses complying with the Workers' Compensation Act and their employees may not be sued in the courts by employees for work-related injuries, except for intentional assaults and conditions so grossly unsafe as to make injury substantially certain.

A requirement to purchase insurance is based on the number of employees employed by a business and varies from state to state.

As a result of these requirements and because a self-insurer needs to establish or purchase services similar to those provided by the insurer, Workers' Compensation self-insurance is generally considered feasible only for large employers with full time risk managers.

Competitive and Monopolistic State Funds

In most states, Workers' Compensation insurance must be purchase from a private insurer. In a number of states, Workers' Compensation insurance is available from a state fund organization as well as from private insurance companies. These competitive states funds are ones in which private insurers compete with state-funded insurance programs. Monopolistic states are states in which the only Workers' Compensation products offered are through state funded programs.

When Workers' Compensation is NOT Purchased

If you are not required to purchase Workers' Compensation insurance, and you elect not to do so, you will not be able to use any of the three common law defenses if a claim is brought against you. Common law defenses include:

• Assumption of risk - An employee who voluntarily entered into a job knowing about the unsafe nature of the premises or the work, and who understood the risks inherent in the job, cannot recover damages.
• Contributory negligence - An employee whose negligence somehow contributed to his own injury cannot recover damages.
• Negligence of a fellow employee - An employer is not liable for an injury to an employee that resulted solely from the negligence of a fellow employee.

Experience Rating is a system for recognizing an insured's past loss experience when determining premiums.

FAQs

What is managed care?
There are no industry standards governing the definition of managed care. Most insurance companies claim to use it. In general, it is any system used to control the cost and/or speed of health care related services. It includes, but is not limited to, prescription cards, PPOs, occupational doctors, return to work programs, and case nurses employed by insurers. In many cases, it involves an insurance company making a decision about the cost or appropriateness of a procedure prior to its use. You should ask specific details about the actual services included in managed care. Pay specific attention to who makes procedural decisions.

What is an Alternate Employer endorsement? 
An Alternate Employer endorsement affords you coverage for Workers' Compensation under the employee leasing company's policy.  The reason for this endorsement is that you may be statutorily liable for injuries to these employees, and by being named under the leasing companies policy, you are treated as a joint employer under the policy.  If you lease employees, you should request to be named an Alternate Employer under the leasing company's Workers Compensation policy and receive a certificate of insurance stating this fact.<?XML:NAMESPACE PREFIX = O />

Why do I need a Workers' Compensation policy if all of my employees are leased?
Your state requires you to be responsible for accidents to your workers. When you lease your employees, you sign a contract that stipulates the labor contractor is a co-employer with you for the purposes of Workers' Compensation related accidents. Neither the courts the nor state Workers' Compensation boards have adequately tested this contractual arrangement. Many events could potentially lead to uncovered claims as well as state noncompliance punitive actions. A few include uninsured subcontractors, employees who are inadvertently omitted from payroll processing, any volunteer labor such as an intern, or the business failure of your labor contractor. In fact, several states have already passed laws requiring you to purchase a minimum premium Workers' Compensation Policy.

Why should I obtain Certificates of Insurance from my subcontractors?
Most state statutes contain language that forces you to assume liability for the operations and employee-related injuries of any subcontractor you use if they are uninsured. If you do not obtain COIs, several things could happen. First, your insurance program could be jeopardized due to a loss you did not intend to pay. Second, your insurance carrier will treat the uninsured subcontractor's work as though it was your work and make an appropriate charge for it.

What is a Workers' Compensation audit?
Insurance companies can choose to audit your Workers' Compensation several ways. First, a carrier can choose to not audit, due to a minimum premium threshold,  and you would owe no more money. Second, the carrier can order a physical audit to be performed by either a CoverageCorp employee or an independent auditor. In either case, an actual auditor visits you to review your payroll records. Finally, you could receive a self-audit report. This report contains your various classifications of payroll and you fill in the actual payroll for each one.

What is an experience modification?
This is a measurement of how your loss experience compares statistically to companies similar to yours. If your loss experience is exactly equal to your expected losses, your modifier is 1.00. If your loss experience is worse than expected, your modifier is greater than 1.00.

The rating organization governing your state (either your state rating organization or the National Council for Compensation Insurance) makes the official calculation of your experience modification. Insurance companies are not allowed to perform the official calculation (although many perform an estimate).

Your experience modification belongs to you. You can usually obtain copies of your experience modification from  your carrier.

If you think your modification is in error, it may be. There are specific reasons that justify recalculating experience modifications. Typographical errors are an example of correctable mistakes. Unfortunately, changes in reserves are not adjustable until the next calculation, even if the change is due to subrogation recoveries, a claim closing lower, or a lowered reserve.

A deductible on your policy can affect your calculation. Currently, deductibles are allowed in 39 states. Every state has different rules for reporting deductible payments. States can be either gross reporting net reporting. Gross reporting states (most states ) report the entire loss, including the amount of the deductible you paid. Net reporting states report the loss less the amount of the deductible you paid. States currently net reporting are: Alabama, Colorado, Georgia, Hawaii, Indiana, Kansas, Kentucky, Maine, New Mexico, and Oregon.

What is included and excluded in the definition of payroll?
You can exclude several items from total payroll, including tips, group insurance, severance pay, military duty pay, employee discounts, expense accounts, work uniform allowances, and perks such as automobiles.

However, some often overlooked items that should be included are commission, bonuses, overtime pay, social security payments, and employee deductions to plans.

When am I required to carry Workers' Compensation?
Carrying Workers' Compensation insurance is recommended any time someone works for you, whether you are required to do so or not. In addition to guaranteeing payment for your employees' injuries, you benefit from the protections of your Workers' Compensation statutes. Most statutes shield you from injured worker suits when you have purchased Workers' Compensation. Further, if you do not purchase this coverage, most states stipulate that you will not be able to use the three important common law defenses when you go to court: employee assumed the risk of employment; a fellow worker caused the injury; the employees own negligence contributed to the accident.

Who determines the amount of a Workers' Compensation claim payment?
For medical bills, most states dictate a maximum that medical care providers can charge for work performed. Most insurance carriers use PPO networks to negotiate reductions from this preset schedule. There are twelve states, plus the District of Columbia, that simply require that medical bills be fair: Alaska; Delaware; Idaho, Illinois, Indiana, Iowa, Missouri, New Hampshire, New Jersey, Tennessee, Virginia, and Wisconsin.

For lost wages, every state dictates a calculation formula used to determine the amount of a Workers' Compensation claim payment. These schedules are based on the employee disability rating, a maximum weekly claim payment, and the employee's actual wages. The disability rating is a professional opinion given by an appropriate physician.

Are my workers covered when they temporarily travel to other states?
Yes. The only question is, "Which state's benefits apply?" When your workers travel to another state on a temporary basis, your coverage goes with them. However, they often have the option to elect payment using the benefits of the state in which they were injured. Since every state is different, an injured worker's options will vary by state.  One note to remember is that at the time your Workers' Compensation policy renews or is issued, the insurance carrier must be told the names of all of the states in which you are currently operating, temporarily or otherwise.

Are my workers covered when they travel to other countries?
They are usually not covered. A few states extend state benefits worldwide. One state, North Carolina, includes coverage for all expenses, including the transportation of the worker back to the United States. However, if you have operations, or employees who travel, outside of the United States, its possessions, and territories, you should purchase a Foreign Liability Package policy.

What do I need to do if I operate in North Dakota, Ohio, Washington State, West Virginia, or Wyoming?
These states have state funds that you are required to use for Workers' Compensation. Unfortunately, they only provide you with coverage for medical payments and lost wages of your injured employees. They do not protect you from Employers Liability suits. If you operate in any monopolistic state, you will need to purchase stop gap (or overhead liability) coverage.

Can I add an additional insured to this policy?
Many owners and contractors will often ask to be named as an additional insured on your policy. Their request is misplaced. First, your policy protects your workers. Second, additional insured status might allow the additional insured to send their Workers' Compensation claims to your insurance carrier and affect your experience. Finally, there are no industry-accepted additional insured endorsements for Workers' Compensation.

Can I waive my rights of subrogation under this policy?
Standard Workers' Compensation policies do not give you this right. The insurance carrier must approve the ability to waive the rights of subrogation for Workers' Compensation. If someone else is responsible for injury to your employee, you should hold them liable. However, sometimes you may need to waive your rights in a contract in order to secure a job. When a carrier agrees to add this waiver there is usually a charge based on the payroll associated with the job.