Workers Compensation

Tom WallaceLaws and Taxes, Risk Management

Workers Compensation for Employees-General

Most states require coverage for employees who become sick or are injured on the job. Workers compensation insurance and state workers compensation law work together to provide benefits to employees.  The purpose of this post is not to give a policy overview.

For those of you with larger organizations you know the drill. It can be a sizable portion of your insurance budget. Options for coverage are plentiful, therefore a review of the basics will help when reviewing or purchasing a policy.

Statutory Coverage-3 (A)

First, are states in which you operate listed correctly on your workers compensation information or declarations page? You will see state abbreviations next to a “3(A)” notation.  For example, if you operate in New York and Massachusetts you should see 3(A):NY, MA on the declarations page.  Consequently, the policy will provide coverage according to the law in both states subject to policy exclusions.

Coverage can be trickier if an employee is injured outside their home state. Home state benefits often apply but reciprocity agreements with other states may apply. Reciprocity can vary by state and have time frames in the law. Therefore, these time frames can play a factor in determining which benefits apply to an injured employee.  As a result or reciprocity the next coverage is very important.

Other States-3(C)

Other States Coverage should list all states other than the states listed for statutory coverage. An exception will apply to four states noted below. Other states coverage provides statutory protection for states not listed in 3(A), subject to restrictions. An example will make this easier.

Company A operates in PA and opens another location in FL. Employees are hired who live and work in Florida. Their insurance provider is not notified and 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 have coverage if FL is somehow listed in 3(C) as long as the work in FL began during the current policy period. Coverage exists because of this Other States coverage. Without this safety provision the employer would be providing benefits from their own operating funds and perhaps be open to fines.

However, if the injury occurred in the next policy period there could be a problem. The reason a problem could exist stems from Other States coverage having a 30 day notification period in a new policy term. As a result, multi state operations need to monitor workers compensation policies.

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.

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 job related injuries. This is known as the “exclusive remedy” doctrine. This coverage is designed to cover an employer’s liability in the event of an injury to an employee due to circumstances that negate the exclusive remedy doctrine.

Commercial General Liability policies exclude these types of suits. Employer’s Liability does not coverage claims 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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