Workers' Compensation and Employers Liability
Workers' compensation is a no-fault statutory benefit system: employees give up the right to sue the employer for work injuries, and the employer pays prescribed benefits regardless of fault. The exam tests benefit categories, the Part One/Part Two structure, and the boundaries of exclusive remedy.
Statutory benefits
- Medical: unlimited and often lifetime in most states.
- Disability income (indemnity): temporary total, temporary partial, permanent partial, and permanent total, usually a percentage of average weekly wage (commonly 66 2/3%) subject to a state maximum.
- Death benefits and funeral expenses for dependents.
- Rehabilitation and retraining in many states.
Policy structure
- Part One - Workers Compensation: the insurer pays all benefits the statute requires, with no dollar limit.
- Part Two - Employers Liability: covers suits outside exclusive remedy, such as a third party's action-over claim, with limits per accident, per employee for disease, and a disease policy limit.
- Part Three - Other States Insurance extends coverage to listed states where the employer begins operations.
Exclusive remedy and its limits
- Bars employee suits against the employer but not against third parties; the employer may hold a lien on the third-party recovery.
- Exceptions include intentional torts, certain safety-equipment failures by statute, and dual-capacity claims.
- Independent contractors are generally excluded; sole proprietors and partners are excluded unless they elect coverage.
Worked example
An employee with a $900 average weekly wage is off work 10 weeks. The state rate is 66 2/3% of the average weekly wage with a $750 maximum. The weekly benefit is $900 × 0.6667 = $600, below the maximum, so the temporary total disability payment is $600 × 10 = $6,000. Medical bills are paid separately and do not reduce the indemnity benefit.
Traps that cost marks
- Treating Part One as subject to the policy's dollar limits - it is not.
- Confusing Part Two's per-employee disease limit with the per-accident limit.
- Forgetting that North Dakota, Ohio, Washington, and Wyoming run monopolistic state funds where private policies do not apply.