Workers’ Compensation Insurance Coverage

Under current Workers’ Compensation laws, disabled employees receive compensation for job related injuries without having to challenge their employer in court, regardless of whether or not their employer was at fault for their injury.

Before the advent of Workers’ Compensation laws, the only recourse open to employees who were injured on the job was to seek damages under the "Common Law Liability" system.  The Common Law system seemed to favor employers and made it difficult for an injured employee to receive compensation for on-the-job injuries.

Prior to Workers’ Compensation, a worker seeking damages from their employer for a job related injury had to prove their employer was negligent AND that their employers particular negligence resulted in their injury.

Even if that employer was negligent, they had the right to invoke certain legal defenses.  These legal defenses include:

• Assumption of Risk  --  Based on the idea that an employee knows of the risk when they take a job and, therefore, are "assuming" the risk in exchange for compensation.  The more hazardous the workplace, the more likely the defense would be utilized.

• Fellow Servant Rule – Asserts, as the employer’s defense, that the employee’s injury was caused by the negligence of a fellow employee, and not that of the employer.

• Contributory Negligence – The principle that an injured employee who even partially contributed to the cause of their injury lost all rights to seek damages from their employer for that injury.

The Workers Compensation system was NOT developed to primarily benefit the worker, but rather to limit the liability of businesses.  However, Workers’ Compensation today does have many important worker protections.

Workers’ Compensation is a system designed to assist employees injured on the job.  If an employee dies on the job as a result of work related injuries, the employees beneficiaries are entitled to collect Workers’ Compensation death benefits.

Work related injuries - often referred to as "industrial injuries" - for Workers’ Compensation purposes are injuries in any occupation that occur as a result of employment.  Another term for an injury covered by Workers’ Compensation is a "compensable injury."

Workers’ Compensation is often termed as a "no-fault" system.  Basically, the injured worker gives up the right to sue the employer in court, but in return receives compensation without having to prove their employer was negligent.

In return, the employers liability is limited according to limits specified under state law.  Of course, the state Workers’ Compensation limits are most often less than what an individual could otherwise obtain in court.  However, there are a very few cases where an employee can sue in state court.

There were other barriers to a successful employee suit against their employer prior to Workers’ Compensation.  Many of those disabled or killed could not afford to go out and hire an attorney to pursue litigation.  Sometimes injured employees who pursued litigation were fired and never permitted to return to work.

Also, if an injured employee died during the suit, the survivors did not have the right to continue the suit.  Employers also began to have employees sign waivers of liability as a condition of employment.

Maryland was the first state to pass a Workers’ Compensation law in 1902, but the U.S. Supreme Court struck it down as unconstitutional.  Finally, in 1916 Congress passed the Federal Employers Compensation Act for federal employees.  Ten other states passed Workers’ Compensation laws in 1911, starting with Wisconsin.  By 1948, all 48 states had Workers’ Compensation - Hawaii and Alaska already had theirs by the time they gained statehood.

Today, Workers’ Compensation laws are in effect in all fifty states, the District of Columbia and the U.S. Territories.  Almost every state is "compulsory."  Only New Jersey, South Carolina and Texas are "elective."  Even those states laws are very "compelling" because almost no employer rejects the law and gives up their common law defenses.

Some employers are covered under Federal Law:

• U.S. Civil Employees  --  Federal Employees Compensation Act

• Shipbuilding, Ship Repairing, and Longshoreman  --  U.S. Longshoreman and Harbor Workers Compensation Act

• Crews of Vessels  --  The Jones Act

• Civilian Employees at U.S. Military Bases  --  The Defense Base Act

• Coal Miners and railroad Workers  --  Various Other Federal Laws

There are instances when a Workers’ Compensation policy will not meet the requirements set out by the Federal Government for these certain types of employees.  However, this situation can be corrected by simply adding an endorsement to your Workers’ Compensation Insurance policy.

Workers’ Compensation differs widely from state to state by statute -- both in provisions and the administration of the plans.  Basically, Workers’ Compensation provides compensation and medical benefits for injured or ill workers, and death benefits and pension benefits for survivors.  In all but a few states, the employer bears the entire cost of the Workers’ Compensation premiums and cost.

Often Workers’ Compensation will provide retraining benefits to injured employees who cannot continue in their old positions.

Also, virtually every state and the federal government have laws concerning Workers’ Compensation and occupational diseases.

Workers’ Compensation statutes exclude most farm workers, domestic servants, and employees of small businesses with 5 or fewer employees.

Who administers a state’s Workers’ Compensation program depends on that particular state.  It could be a state agency, an insurance carrier, or some combination of the two.  The U.S. Department of Labor’s Office of Workers Compensation Programs administers it at the federal level.

Several billion dollars a year are paid in Workers Compensation premiums across the U.S.  These premiums are most often based on a percentage of total payroll.  Ideally, benefits paid out are less than premium paid.  The difference between premiums paid and benefits paid out goes for accident prevention, claim reserves, administrative expenses and insurance carrier profit.


Coverage Options

A business that is required to carry Workers’ Compensation insurance must purchase said coverage or show an ability to provide the required benefits - self-insure.  In Tennessee, insurance or self-insuring is required.  Tennessee does allow self-insurance, if the financial requirements are met, there are specified loss handling procedures, and proper funding of reserve requirements are met.

Failing to provide Workers’ Compensation coverage is serious.  It could mean a fine of up to $1,000, one (1) year in state prison, or both.  Also, the employer could leave itself open to lawsuits for workers’ injuries and the loss of its common law defenses.

The most common remedy is to purchase coverage from a private insurance carrier via Harman Stone Corp.  Tennessee, Alabama, Mississippi, and Arkansas are some of the 32 states that allow the purchase of private Workers’ Compensation insurance.