Workers Compensation Coverage Guide, 3rd Edition

Steven Coombs, David Thamann

• Verlag: The National Underwriter Company
• Jahr: 2016
• ISBN:
  9781941627792
• Thema: Betriebswirtschaft
• Thema: Versicherung

Workers Compensation Guide: Coverage and Financing, Third Edition is the single source that guides you through the entire spectrum of issues and considerations in the complex area of workers compensation. From exclusions, to limits of liability, endorsements, and policy wording this unique resource delivers valuable, expert insights every step of the way

Chapter 1

Policy Organization, General Section

Policy Organization

The workers compensation and employers liability insurance policy contains three separate and distinct parts of coverage. What coverages are applicable are indicated in the policy’s information page, which is the workers compensation policy’s equivalent of the declarations page in other property and casualty insurance formats. (The information page also lists the policy period, any applicable endorsements, and the premium for the policy.)

Part one is the workers compensation section, under which the insurer agrees to pay the benefits imposed upon the insured by the workers compensation law of the state or states listed on the information page in item 3.A.

Part two is the employers liability section, which protects the insured against liability imposed by law for bodily injury to employees in the course of employment that is not compensable under the workers compensation section. (Chapter 3 in this coverage guide contains a discussion of why employers liability coverage is necessary as part of a workers compensation coverage program.)

Part three applies to other states insurance. The insurer promises to reimburse the named insured for the benefits required by the workers compensation law of the state (or states) listed in item 3.C. of the information page if the insurer is not permitted to pay benefits required by the applicable workers compensation law directly to persons entitled to them. This coverage applies only to those states listed in item 3.C. of the information page, and if the insured begins work in any one of those states after the effective date of the policy, and if the insured is not insured for such work or is not self-insured for such work, all provisions of the policy will apply as though that state were listed in item 3.A. of the information page.

General Section

The workers compensation policy opens with a general section, something akin to an informative introduction to the policy. The general section contains five clauses.

The first clause identifies the policy as a contract of insurance between the employer (named on the information page) and the insurer. The benefits paid under a workers compensation claim may go to an employee, but the insured is the employer. In this way, the policy is a liability policy covering legal obligations imposed (in this case, statutorily) upon the insured. And, since the policy is a contract, this clause notes that the only agreements related to the coverage provided by the policy are those that are stated in the policy—no outside contracts or side agreements are to have an effect on the coverage. Of course, the terms of the policy can be changed or waived as any other contract can, but such modifications have to be accomplished by endorsements to the policy, endorsements which are issued by the insurer.

The first clause also specifies that the information page is part of (incorporated into as if it were an actual part of) the overall policy. The following data is listed on the information page: the effective dates of the policy; applicable endorsements; the insured and the insurer; the estimated premium; and the various states in which the coverage parts of the workers compensation policy apply.

The second clause confirms that an employer named in the information page is the named insured under the policy. The insured can be an individual, a partnership, a corporation, or some other entity. If the employer is a partnership, this clause specifies that an individual partner is an insured, but only in the capacity as an employer of the partnership’s employees. The phrase recognizes the legal status of a partner; that is, it makes an individual partner an insured so that the partner’s private holdings won’t become subject to a claim by an injured worker.

The third clause notes that the coverage and benefits paid to the injured workers are based on the workers compensation law of each state or territory named in Item 3.A. of the information page. Item 3.A. is where the insured should list all states in which it conducts operations. The insured might have operations in more than one state, such as plants, retail stores, or traveling representatives; in some cases, major corporations have operations in every state. The insured might have one business domicile (the major place of business operations, or the official place of incorporation), but do business in multiple states; a business as noncomplex as a small plumbing contractor near a state border may have an exposure in two or three states. Or, the insured might not have multi-state operations nor employees that daily cross state lines, but may regularly send employees to lengthy seminars or meetings that are traditionally held out-of-state. In all these instances, the insured faces multi-state workers compensation exposures, and since the insured is charged with the responsibility of listing the appropriate state(s) or territory so that the proper benefits can be paid to injured employees, understanding and complying with this clause is crucial for insured employers.

This third clause also emphasizes the point that workers compensation coverage is applicable under and in accordance with state law, not federal compensation law. Quoting the policy, “The workers compensation law does not include any federal workers or workmen’s compensation law, any federal occupational disease law, or the provisions of any law that provide nonoccupational disability benefits”. Also, the “nonoccupational disability benefits” phrase shows that coverage under the policy is meant for injuries arising out of and in the course of employment, not disabilities that have nothing to do with employment; an example of this would be an employee of the named insured falling and breaking his leg while at home.

An additional note on this third clause: it shows that treatment of occupational diseases is covered under the workers compensation policy. The workers compensation part of the policy takes over the liability of the employer under the compensation laws of any state indicated on the information page, so any mandated obligation for occupational diseases is covered. Since the insuring clause of the workers compensation part of the policy refers simply to the “workers compensation law”, and this term is defined in the third clause as including any occupational disease law, special endorsements are not necessary in states having separate occupational legislation. Listing the state on the information page takes care of all such liability under the compensation law of that state.

The fourth clause in the general section defines “state” as any state of the United States of America, and the District of Columbia. This does not mean that the workers compensation policy is applicable only in the fifty states and the District of Columbia. Any state or territory named in Item 3.A. of the information page shows the territorial applicability of the policy, but “state” is defined here just to clarify other paragraphs and phrases found throughout the policy. For example, if an employee is traveling in a foreign country on business, benefits for injuries suffered will be based on the workers compensation law of the state or states listed in Item 3.A.

The last clause in the general section declares that the policy “covers all of your workplaces listed in Items 1 or 4 of the information page; and it covers all other workplaces in Item 3.A. states unless you have other insurance or are self-insured for such workplaces.” This clause shows the omnibus nature of the workers compensation coverage. If the insured has one workplace or twenty workplaces, this policy can apply; there is coverage if the insured lists all the workplaces on the information page. Furthermore, there is coverage even if the workplaces are not specifically listed, as long as the state(s) where the workplaces are located is noted in Item 3.A. Of course, this coverage does not apply if the insured has other insurance or is self-insured for such workplaces; otherwise, the insured would have duplicate coverage and that is something that insurers attempt to prevent.

Chapter 2

Workers Compensation Insurance

To “Pay Promptly When Due the Benefits Required by Law”

This is the heart of the workers compensation system—the pledge to provide a statutorily mandated schedule of benefits to persons injured in the course of employment. Under part one of the workers comp policy, the insurer agrees to pay the benefits imposed by law on the insured employer arising from injuries sustained by an employee during and in the course of employment.

The workers compensation insurance section is part one of the policy and contains eight clauses.

How This Insurance Applies

Workers compensation insurance applies to bodily injury by accident or by disease. Bodily injury includes resulting death. This clause attaches stipulations to the declaration.

First, bodily injury by accident must occur during the policy period.

Second, bodily injury by disease must be caused or aggravated by conditions of employment, with the employee’s last day of last exposure to the conditions causing or aggravating the bodily injury occurring during the policy period. For example, in order for workers compensation insurance to apply to a worker who is suffering from lung disease, the insured would need to show the following: the worker’s disease was caused by or aggravated by the working conditions (such as, having to constantly inhale smoke or other indoor air pollutants) and, the insurance policy has to be in force at the time the employee was last exposed to the conditions.

There are several items to note concerning this clause. First, the insurance applies to “bodily injury.” The workers compensation policy does not define that term, however, and that can lead to disputes over the question of coverage should an employee make a claim based on, for example, mental stress. Is mental stress a bodily injury under the workers compensation policy? This issue is discussed more fully in Chapter 13, but suffice it to say that since the policy does not define “bodily injury,” the question is left to individual state laws and court decisions to settle.

Another point to note is that the coverage is for bodily injury caused by accident or by disease. Just as a slip and fall injury at work is covered, so also is a disease-based injury, such as asbestosis or electromagnetic field health hazards—as long as such disease is caused or aggravated by the employment.

Finally, the clause certifies that coverage is provided if the bodily injury occurs during the policy period. This makes the workers compensation policy an occurrence-type policy, similar to the commercial general liability occurrence form.

We Will Pay

In this clause the policy specifies that the insurer will “pay promptly when due the benefits required…by the workers compensation law”—a very simple and straightforward insuring agreement. Whatever the particular state workers compensation law declares the benefit to be—say for a broken arm—that is what the insurer will pay. A complication can arise, though, over the fact that an employee who is injured while working in a certain state can claim the compensation benefits of that state regardless of the fact that the employer is based in another state. In other words, an injured employee can choose among several possible states (depending on the laws of the states and the circumstances of the injuries) for his or her benefits. For example, just because company A is located in Maryland does not mean that an injured employee always has to file for workers compensation benefits in Maryland; if that employee is injured while on business in Pennsylvania, he or she could seek the compensation benefits of Pennsylvania.

This can seem to be unacceptable “forum shopping”—picking and choosing where to file a claim to get higher benefits—but in reality, such a practice is limited by the various state laws and by some judicial decisions, such as Bradshaw v. Old Republic Insurance Company, 922 S.W.2d 503 (Tenn. 1996). In this case, Bradshaw worked for a Tennessee company but was injured while on business in Maryland. He filed for benefits in Maryland but was turned down; he then filed in Tennessee and was turned down again. A Tennessee court declared that the election of remedies rule barred the Tennessee claim since the employee had “affirmatively acted” to get benefits in another state. Just because that other state denied his claim, the employee could not then seek the benefits in Tennessee. He had made his choice (Maryland) and to allow a second choice (or a third or fourth) would be unfair to the workers compensation system and a burden to the legal system.

In another Tennessee case, Eadie v. Complete Company, 142 S.W.3d 288 (2004), the Supreme Court of Tennessee declared that “an employee who suffers a compensable injury in another state may be barred from recovering benefits under Tennessee law through the election of remedies doctrine.” In another example under Tennessee law, the Supreme Court of Tennessee in Madden v. The Holland Group of Tennessee, 277 S.W.3d 896 (2009), reiterated the point that the election of remedies doctrine may preclude an injured employee who has pursued a workers comp claim in another jurisdiction from filing the same claim in Tennessee.

These cases represent examples of the “election of remedies” doctrine that states use to limit forum shopping. This doctrine is designed to prevent forum shopping, vexatious litigation, and double recovery for the same injury.” (Note that Tennessee is not the only state to honor this doctrine.)

There is another point to consider: the insurer has agreed to pay the benefits required by the workers compensation law, a phrase defined on the policy as the “workers compensation law… of each st...