Workers Compensation Insurance
The bargain
Workers compensation is a no-fault, exclusive remedy system: employees give up the right to sue the employer for most work injuries, and the employer pays statutory benefits regardless of fault. The injury must arise out of and in the course of employment.
The three parts
Part One - Workers Compensation pays whatever the state statute requires and has no dollar limit. Part Two - Employers Liability covers the employer's tort exposure, such as third-party actions over and loss of consortium, up to stated limits. Part Three - Other States extends coverage to listed states.
Benefits
Medical care (usually unlimited), disability income (typically about two-thirds of the average weekly wage, subject to a state maximum) in categories - temporary total, temporary partial, permanent partial, permanent total - plus death and burial benefits and rehabilitation.
Who and how much
Employees include part-time and seasonal workers; independent contractors are excluded; sole proprietors and partners are generally excluded but may elect coverage; corporate officers are included but may elect out. Premium = class rate per $100 of payroll times payroll, adjusted by an experience modifier.
Defenses and exclusions
Intoxication, willful self-injury, off-duty injuries, and injuries outside the scope of employment. Federal systems (FELA, LHWCA, Jones Act) replace state workers compensation for railroad, maritime, and longshore workers.
Worked example: An employee falls in the shop and is hurt. Part One pays medical and disability per statute. If the employee also sues a machine manufacturer, and the manufacturer sues the employer, Part Two Employers Liability responds.