Midterm 2 Ch 16

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workers compensation

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· A system to enforce a series of state laws thatrequires employers to pay workers for their work-related injuries and illnesseswith no relationship towho caused the injury or illness.

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1.1. History and Purpose

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· Beginning with Wisconsin in 1911, U.S. jurisdictions developed the concept of workers’ compensation that compensated workers without the requirement that employers’ negligence must be proved (that is, with strict employer liability).

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common law defenses

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· The three arguments that employers utilized toavoid assuming responsibility for employees’ work-related injuries prior to the establishment of workers’ compensation laws:the fellow-servant rule, the assumption of risk doctrine, and the contributorynegligence doctrine.

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· Fellow-servant rule:

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Defense under which an employee injured as a result of the conduct of a fellow worker cannot recover damages from the employer.

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· Assumption of risk doctrine:

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Defense providing that an employee who knew, or should have known, of unsafe conditions of employment assumed the risk by remaining on the job.

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· Contributory negligence:

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Defense arguing that an employee was injured through negligence of the employer, but was also partly at fault.

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· Employers’ liability:

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Portion of a worker’s compensation policy that protects against potential liabilities not within the scope of the workers’ compensation law, yet arising out of employee injuries.

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· Quid pro quo:

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(Latin phrase meaning “this for that”)—give-and-take of rights and duties between employers and employees.

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· A major feature of coverage under workers’compensation is that

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only injuries and illnesses that “arise out of and in the course of employment” are covered. · It is compulsory or elective, depending on state law.

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· Inclusive laws:

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Laws that list all the types of employment covered under workers’ compensation.

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· Exclusive laws:

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Laws that cover all the types of employment under workers’ compensation except those that are excluded.

(Doesn’t this sound like – Open Perils, Named Perils?)

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sole remedy

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· Provides that employees cannot (in mostcircumstances) sue their employers for work-related injuries, regardless offault, when covered by workers’ compensation

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· The two limitations of coverage “arising out of and in the course ofemployment” are as follows:

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First, the injury must arise out of employment, meaning that the job environment was the cause.

The second limitation on coverage is that the loss-causing event must take place while the employee is on the job.

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· Occupational disease:

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An injury arising out of employment and due to causes and conditions characteristic of, and peculiar to, the particular trade, occupation, process or employment, and excluding all ordinary diseases to which the general public is exposed.

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Medical Benefits

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· All laws provide unlimitedmedical care benefits for accidental injuries.

· Medical expenses resulting from occupational illnesses may be coveredin full for a specified period of time and then terminated.

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Indemnitybenefits:

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Reimburse insureds for actual costs incurred for health care up to covered limits in traditional fee-for-service plans.

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· The amount and duration of indemnity paymentsdepend on the following factors:

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Whether the disability is total or partial, and temporary or permanent

The employee’s compensation

Each state’s maximum duration of benefits (500 weeks in VA)

The waiting period (7 days in VA)

Cost-of-living adjustments (.55% for 2015)

Max benefit in VA is limited to $975/week or 66 2/3% of salary, whichever is less

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total disability

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refers to the condition of an employee who misses work because he or she is unable to perform any of the important duties of the occupation.

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Partial disability

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means the injured employee can perform some, but not all, of the duties of his or her occupation.

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Permanent total disability

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means the injured person is not expected to be able to work again.

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Temporary total disability means

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the injured employee is expected to be able to return to work at some future time.

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Permanent partial disability:

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The loss of certain body parts.

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· Amount of Benefits

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Weekly benefits for death, disability, and disfigurement are primarily based on the employee’s average weekly wage multiplied by a replacement ratio, expressed as a percentage of the average weekly wage

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· Durationof Benefits

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In thirty-nine jurisdictions, no limit is put on the duration of temporary total disability.

In forty-three jurisdictions, permanent total benefits are paid for the duration of the disability and/or lifetime.

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· WaitingPeriods

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Every jurisdiction has a waiting period before indemnity payments (but not medical benefits) for temporary disability can begin; the range is from three to seven days.

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Explainthe former common law defenses employers utilized to avoid liability foremployees’ on-the-job injuries.

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There were three common law defenses employers utilized toavoid liability for employees’ on-the-job injuries:● Thefellow-servant rule – Under this rule, an employee who was injured as aresult of the conduct of a fellow worker could not recover damages from theemployer.● Thedoctrine of assumption of risk – This doctrine provided that an employeewho knew, or should have known, of unsafe conditions of employment assumed therisk by remaining on the job. Further, it was argued that the employee’scompensation recognized the risk of the job. Therefore, he or she could notrecover damages from the employer when injured because of such conditions.● Thedoctrine of contributory negligence – If an employee was injured throughnegligence of the employer but was partly at fault, the employee was guilty ofcontributory negligence. Any contributory negligence, regardless of how slight,relieved the employer of responsibility for the injury. le>

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· The workers’ compensation and employers’ liability policy has threeparts.

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Part I on specifies that they will pay promptly for benefits required under the state workers compensation laws.

· Employers’ liability (Part II): Portion of a worker’s compensation policy that protects against potential liabilities not within the scope of the workers’ compensation law, yet arising out of employee injuries.

· Other States Insurance (Part III): Portion of a worker’s compensation policy that allows the insured to list states (perhaps all) where the employees may have potential exposure. n>

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Loss Prevention and Reduction

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· Total loss costs are a function of accident frequency and severity. · Frequency is a better indicator of safety performance than severity.

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· State-operatedworkers’ compensation funds:

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State government agencies responsible for collecting workers’ compensation founds and distributing benefits.

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1. Howare workers’ compensation rates influenced?

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Answer: Workers’ compensation rates are influenced by the following factors. ● Payroll – The premium for workers’ compensation insurance typically is based on the payroll paid by the employer. ● Hazard – The rates vary with the degree of hazard of the occupation. ● Experience rating – Large employers can elect to have experience rating, which takes a company’s prior losses into account in determining its current rates. ● Nature of the law – If the benefits of the law are high, rates will tend to be high. If they are low, rates will tend to be low. ● Administration – If those who administer the law are conservative in their evaluation of borderline cases, premium rates will be lower than in instances where administrators are less circumspect in parceling out employers’ and insurers’ money

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With high awards for punitive and general damages (neither available in workers’ compensation) in tort claims, workers often

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perceive the exclusivity of compensation laws as inequitable.

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unemployment compensation

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State unemployment compensation programs were established as a result of federal legislation.

The law transfers to the employer at least part of the financial element of a risk faced by the employee.

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Employers Subject to Tax

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· The federal tax applies to firms that have one or more employees in each of twenty weeks during a calendar year, or firms that pay $1,500 or more in wages during any calendar quarter.

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Amount and Duration

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· The amount of the weekly benefit payment a worker may receive through unemployment compensation varies according to the benefit formula in the law of each state.

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Qualifications for Benefits

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· The conditions to be fulfilled to quality for benefits of unemployment are:

They must be involuntarily unemployed. They are required to register for work at a public employment office and file a claim for benefits. They must have been employed in a job covered by the state unemployment compensation law. They must have earned a specified amount of pay or worked for a specified length of time, or both. They must be able to work, benefits), available for work, and willing to take a suitable job if it is offered to them.

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Disqualifications

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· Most state laws disqualify those who: quit voluntarily without good cause or who were discharged for just cause, refuse to apply for or accept suitable work, or are unemployed because of a work stoppage caused by a labor dispute

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4.1.1. Noncontributory·

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Most unemployment compensation insurance is noncontributory: employers pay all the cost in most states.

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· Federal Unemployment Tax Act(FUTA):

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Law that places a tax on employers at the rate of 6.2 percent of workers’ pay in covered jobs, excluding anything over $7,000 paid to a worker in a year for the purpose of financing unemployment compensation.