Workers Compensation: Know your Basics

Tom WallaceGeneral, Laws and Taxes, Risk Management, Workers Compensation

Workers Compensation

Workers Compensation Insurance -General

Workers compensation insurance is required in most states and provides benefits to employees who become sick or injured on the job. Insurance benefits follow state workers compensation laws and vary from state to state. This post will discuss what to look for on a declarations page of a standard workers compensation policy.

For those of you who handle this type of insurance, regardless of company size, knowing the basics will allow you to monitor coverage accurately.

Those with larger organizations likely have more experience with how the workers compensation process works but may not know about specific items on the declarations page. Because it can be a sizable portion of your insurance budget, especially if you manufacture your own product, it pays to know the details.

Statutory Workers Compensation Coverage- 3(A)

First, check to be sure states, where your company operates, are listed correctly on your workers compensation information or declarations page. Look for state abbreviations next to the “3(A)” notation.  For example, if you operate in New York and Massachusetts then 3(A):NY, MA should show on the declarations page.  Consequently, the policy will provide coverage according to the law in both NY and MA subject to policy exclusions.

Other States-3(C)

Other States Coverage should list all states other than the “monopolistic states” which are described below. In general, other states coverage provides statutory protection for states not listed in 3(A) or monopolistic states, subject to restrictions.

For example, Company A operates in PA and opens a second location in FL. Employees are hired who live and work in Florida. Company A does not notify their insurance provider about the FL location and employees. Put another way, FL is not listed in 3(A) of the declarations page.

While working, a FL employee is injured on the job. Company A would have coverage if FL is listed in 3(C) and work began during the current policy term. In other words, Other States coverage provides a “newly acquired” state provision.

However, if the FL location was not reported to the insurance company upon renewal of the next term, there could be a problem. The reason, Other States coverage usually has a 30 day notification period once the new policy term begins. As a result, multi state operations should monitor workers compensation policies for other states coverage.

Monopolistic States

These states (ND, OH, WY and WA) have one option, a state run facility, to purchase Workers Compensation coverage. Monopolistic states require a specific policy be in place. Insurance companies cannot add a monopolistic state to a workers compensation policy as it is prohibited to offer a private policy.

Employers Liability

Employers Liability coverage is a part of Workers Compensation. State laws can vary but in general employees give up their right to sue an employer for work related injuries. This is known as the “exclusive remedy” doctrine. Employers Liability coverage exists to protect employers in the event the employee, or employee’s family, retains the right to sue the employer.

Employer’s Liability provides no coverage for sexual harassment, wrongful termination and discrimination. Separate policies known as Employment Practices Liability policies address these issues.

As always, I hope you find this information useful in your business and if you have questions do not hesitate to contact me.

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