Workers' Compensation Insurance
The grand bargain
Workers' compensation is a no-fault system: the employee gives up the right to sue in tort, and the employer accepts liability without regard to fault - the exclusive remedy. For a claim to be compensable, the injury must be personal injury by accident arising out of and in the course of employment. "Arising out of" links the injury to a work cause; "in the course of" links it to time and place.
Benefits fall into four buckets: medical (generally unlimited in duration and chosen from a panel or per statute), indemnity (temporary total, temporary partial, permanent partial, permanent total, and death benefits), vocational rehabilitation, and death benefits for dependents. Scheduled injuries (arms, legs, eyes, hearing) pay a fixed number of weeks; unscheduled injuries to the back, head, or body as a whole are rated by impairment and wage loss. Indemnity is commonly two-thirds of the average weekly wage, subject to a state maximum adjusted periodically.
Defenses and complications: intoxication, willful misconduct, horseplay, the going-and-coming rule (commute injuries are generally not covered), and subrogation liens against third-party recoveries.
Traps
- Assuming the employer's carrier pays for pain and suffering - it does not.
- Missing the interaction with the general liability policy: comp is the exclusive remedy for the employee, but a third party may still be liable.
- Ignoring the statutory notice and filing deadlines.
Worked example
Average weekly wage $900, state maximum $700. Temporary total benefits equal $600 (two-thirds of AWW) because that figure is under the $700 cap; if the AWW were $1,200, the rate would be capped at $700.