Workers Compensation: What Is It and What Does It Mean for Your Insurance Needs?

The workplace is an extremely common setting for a person to be injured. The Workers' Compensation and Employers' Liability Insurance Policies are used to provide insurance coverage for a company's statutory liability (coverage responsibility) under the Workers Compensation Act.

A workers compensation policy responds to accidental injury that occurs during work with mandatory benefits. It usually involves paying for medical treatment and disability. It also handles lawsuits from injured workers that fall outside of the Act. However, besides taking place at work, an injury must also be related to the injured person's duties. Further, the policy also covers costs associated with disease or death that may be the ultimate result of the accident. If the employee's injury does not qualify for compensation under the Workers Compensation Acts (or Occupational Disease Acts, if separate), the policy will respond to an employee who sues his or her employer, alleging negligence.

The type of business that can be insured with a workers comp policy may be an individual, partnership, joint venture, corporation, association, fiduciary, or other entity. A typical policy lists the work locations that are covered. The policy is designed to handle work-related accidents as well as diseases. The amounts that must be paid are defined by the state or jurisdiction where a covered incident occurs. The policy usually lists the other types of costs and expenses eligible for payment under the policy.

In other respects, a workers compensation policy is similar to other kinds of insurance. The policy benefits include being provided a legal defense against certain types of lawsuits. The policy explains that when other sources of loss payment are available, the policy will begin any payment once the other source has paid its obligation. However, the policy will not pay for any amounts that exceed stated benefit amounts. The insurance coverage may be expanded, restricted, or made to comply with specific state requirements through the use of endorsements.

Generally, the insurer that provides coverage acquires the covered company's legal right to pursue payment from a party that may have been responsible for a workplace injury.

Coverage provided to workers who are injured on the job is invaluable and is primarily via workers compensation protection. Such protection is framed by the Workers Compensation Act, which addresses payment for medical treatment and disabilities. It also replaces, largely, the need for injured workers to have to sue their employers for compensation.

However, the nation's workers compensation system has a lot of concerns, including the following:

• Viability of Workers' Compensation
• Federalization
• Affordable Care Act
• Holes in Workers' Compensation
• Blurred lines between Workers' Compensation and group health
• Options to Workers' Compensation
• Evolving claims model
• Pending Court Challenges regarding coverage
• Bureaucracy

Workers Compensation has traditionally been called the Grand Bargain precisely due to workers sacrificing a right to sue employers in place of the ability to depend on fair compensation when injured on the job. However, as is evident from the long list of issues, many important players are dissatisfied with the system. Insurers believe that it is plagued by arbitrarily high treatment costs and fraud. Legislators believe that it is inefficient and acts as a disincentive from business growth. Businesses see it as a burden that hampers profitability and substantially increases payroll expense.

Problems with proper worker protection are likely to increase as employers increasingly ignore the need to buy workers compensation coverage, even though it means breaking laws, facing fines and even criminal penalties. Yet, instances of absent or insufficient coverage persist due to increased use of misclassified employees, manipulation of submitted payroll information, abuse of worker contractual agreements and other problems. The increased presence of sharing economy workers also complicates matters.

If you have employees, it is imperative to seek an insurance professional to help fulfill your protection obligations. Talk to an insurance professional at Williams Insurance about your needs and make sure that you have proper protection.