Workers' Compensation and Employer Liability
The system
Workers compensation is a no-fault statutory system: employees give up the right to sue in tort and receive medical care and wage-replacement benefits regardless of fault. The exclusive remedy doctrine generally bars employee tort suits against the employer. Benefits include medical, disability income (temporary total, temporary partial, permanent partial, permanent total), rehabilitation, and death benefits. A waiting period, commonly around seven days with retroactive payment if disability continues, applies in many states. Federal systems include FELA, the Longshore and Harbor Workers' Act, and the Jones Act.
Policy structure
Part One, workers compensation, pays statutory benefits with no dollar limit. Part Two, employers liability, responds to tort suits arising from employment, with limits per accident, per employee, and policy limit; it also covers some third-party and dual-capacity actions. Part Three covers other states. Premium is based on payroll per $100 of remuneration, class codes, and an experience modification factor; a factor above 1.00 means worse-than-average loss experience.
Traps
- Part One has no policy limit; Part Two does.
- Sole proprietors, partners, and corporate officers may be excluded unless they elect coverage.
- Monopolistic states require coverage through a state fund.
- Benefits are set by statute and are not capped by the policy.
- Payroll, not revenue, is the premium basis.
Rule of thumb: Part One pays whatever the statute requires; Part Two pays tort damages up to stated limits.