In the early 1900’s with the increased mechanization of the workplace, there was an increase in injuries to employees. Most of these injuries were uncompensated injuries that resulted in severe financial hardships to the employees themselves.

The employer was being held negligent for the injuries and deaths of his workers. This resulted in the employers being required to reimburse employees for job-related injuries. However an employer’s negligence was only proven if the employer’s negligence was only proven if the employee sued the employer and his negligence was proven in the court of law.

Because this created a financial burden most employees were unable to bear, Employers Liability acts were established. These acts were designed to modify common law defenses improving the employee’s position but proof of the employer’s negligence was still required. These injustices toward the employee soon resulted in the development of Workers’ Compensation Laws.

With the development of Workers’ Compensation laws, it was considered the first form of social insurance in the United States even though the Federal Government did not regulate it. Each state has its own Workers’ Compensation laws where there are substantial differences in coverage, benefits, requirements and administrative procedures. Although Workers Compensation is established on a state by state basis they all adhere to the same general principles and are regulated mostly by the National Council on Compensation.

In general Workers’ Compensation was established with a new legal concept… Liability with no regard as to who is at fault.

This new legal concept resulted in the development of Workers’ Compensation insurance.

What Does Your Workers’ Compensation Provide?

Types of Compensation Benefits

1. Medical Benefits

Pays for the cost of various types of medical services required because of employment-related injury.

Types of Medical Benefits

• Medical Services
  
• Surgical Services
  
• Hospital Services
  
• Transportation Expense (Ambulance)
  
• Nursing Services
  
• Medication
  
• Medical Equipment
  
• Incidentals

2. Disability Benefits (Loss of Income)

Compensates employees who are unable to work as a result of work-related injury.

Intended to replace a portion of lost income, but not all of it

Encourages a speedy return to work in order to resume full earnings

Types of Disability Benefits

• Weekly
  
• Lump Sum
  
• Combination

Basis of Disability Benefits

• Percentage of the Employees Average Weekly Wage Ranges from 60%-75% with the most common being 66 2/3%

3. Survivor Benefits (Death)

-Compensates a surviving spouse, children or other relatives of the employee whose on-the-job injury results in death.

Two elements of benefits:

Weekly benefit similar to the disability benefit
Amount for funeral and burial expenses

Provisions for survivor and death benefits vary widely per state due to individual laws.

4. Rehabilitation Benefits

Medical Rehabilitation
Physical Therapy
Vocational Rehabilitation
Retraining for a different occupation

Diligent rehabilitation combined with a determined disabled employee can make the difference in a partial or total disability. It also is a means of reducing the cost of losses while restoring an injured workers’ dignity.

All four types of benefits are included in Workers’ Compensation insurance but each benefit has specific provisions established by your state.

What Happens If You Don’t Buy Workers’ Compensation Coverage?

A. Loss of Common Law Defenses Such As:

1. Assumption of Risk

An employee by accepting a job assignment is aware of the hazards common to this profession. Because the employee is aware of the hazards of the job it makes him unable to sue his employer for job-related injuries.

2. Contributory Negligence

Defense relies on the fact job-related injuries often result in some part of the employees own negligence.

3. Negligence of a Fellow Employee

Employer cannot be held liable for an employee’s job-related injury caused by the negligence of a fellow worker.

The Owner’s Dilemma – Include or Exclude?

A. Sole Proprietor/Partnerships

Individuals who are working for themselves.

B. Corporate Officers

Individuals who are hired by the corporation are considered employees of the corporation.

In most jurisdictions because a sole proprietor/partnership are individuals who work for themselves and therefore are not covered under Worker’s Compensation laws. They do have the right to elect to be covered.

Because corporate officers are considered employees of the corporation they are automatically covered under Worker’s Compensation law. In most states a corporate officer can elect to be excluded from coverage.

Generally most owners/officers exclude themselves from Worker’s Compensation coverage. The main reason is the cost factor for covering themselves since it involves minimum payrolls used when calculating the premium. This additional premium can prove to be costly because of these minimum payrolls.

Several factors an owner/officer may wish to consider before excluding themselves from coverage are:

Current health insurance programs will not pay for any on the job injury.

Owner/officer does not carry a disability policy therefore if they suffer a work related injury any loss of wages for temporary disability will not be reimbursed

Owner/officer will not be eligible for any of the disability benefits previously discussed such as:

Loss of income due to permanent disability
Survivor Benefits
Rehabilitation Benefits

With all these factors to consider the additional premium generated by including yourselves under Worker’s Compensation may not be as costly as you thought.

Employer's Liability

Protects the Employer against liability for a situation not covered under a state’s Workers’ Compensation law.
Protects the Employer against liability when an injured worker elects to sue for damages under common law.

A. Employer’s Liability provides defense for:

1. Illegal Employment

Exempt employments such as domestic and agricultural workers may
not be covered in some cases.

Minors who are not covered in at least one jurisdiction.

2. Third Party Over Lawsuits

Employee who suffers an injury sues manufacturer of equipment. The manufacturer then turns around and sues the employer because the primary cause of the injury was due to the employer’s negligence.

3. Dual Capacity

Employee is injured while on the job by a product the employer
manufactured or altered for use. The product must be one marketed to the general public.

4. Loss of Consortium

Spouse of injured employee sues employer for loss of companionship, comfort, affection resulting from the disability the injured employee suffered.

5. Consequential Bodily Injury

Employee’s injury causes spouse to suffer heart attack upon seeing the injured employee.