California law requires employers to have workers’ compensation insurance if they have even one employee. Employers are legally obligated to take reasonable care to assure that their workplaces are safe. Nevertheless, accidents happen. When they do, workers compensation insurance provides coverage. Carrying Workers Compensation insurance protects employees by providing benefits for job-related injuries or illnesses. And it helps protect you and your company by reducing the risk of lawsuits.
ABOUT WORKERS COMPENSATION
Workers compensation insurance covers the cost of medical care and rehabilitation for workers injured on the job. It also compensates them for lost wages and provides death benefits for their dependents if they are killed in work-related accidents, including terrorist attacks. The workers compensation system is the “exclusive remedy” for on-the-job injuries suffered by employees. As part of the social contract embedded in California law, the employee gives up the right to sue the employer for injuries caused by the employer’s negligence.
Workers receive benefits regardless of who was at fault in the accident. If a worker is killed while working, workers comp provides death benefits for the worker’s dependents.
Workers comp insurance is not part of a Businesswners Policy (BOP). It must be purchased as a separate insurance policy.
Premiums are based on the employer’s industry classification code and payroll. Premiums for the most dangerous enterprises, such as trash hauling or logging, may be much higher than premiums for an accounting firm. Location has also become a factor in workers comp premiums. Since the terrorist attacks of September 11, 2001, workers compensation insurers have been taking a closer look at their exposures to catastrophes, both natural and man-made. For businesses located in an area at high risk of catastrophe, premiums may be higher, regardless of the nature of the business itself.
Employers with an annual premium above a certain amount are usually eligible for experience rating, which adjusts the premium up or down depending on the claims history of the company relative to other companies in that industry category. Businesses with higher than average claims will pay a higher premium and those with lower claims will generally pay less. Experience rating is more sensitive to the number of claims (loss frequency) than the dollar value of claims (loss severity). This is because of the insurance industry maxim, “frequency breeds severity.” Insurers know from experience that where more accidents occur, there is a greater likelihood of big losses. A greater number of accidents indicates that overall in working conditions are not as safe as an environment where fewer accidents occur, even if in a given year the few accidents that occurred were more costly.
KEY ELEMENTS OF A WORKERS COMPENSATION POLICY
Usually a workers comp policy has two parts: “Part One, Workers Compensation” and “Part Two, Employers’ Liability.”
Under “Part One”, the insurer contracts to pay whatever the state-required amounts of compensation may be. Unlike other types of insurance, workers comp coverage has no ceiling or limit on the policy amount. The insurance company accepts a transfer of the employer’s entire statutory obligation—whatever the employer is legally obligated to pay as a result of the injury.
“Part Two” of the policy provides coverage for an employer who is sued by an employee for work-related bodily injury or illness that isn’t subject to state statutory benefits. It has a monetary limit.
Employers’ liability also insures an employer in some other situations. One is so-called “third-party over suits,” where an injured worker files suit against someone other than the employer (a third party) and that third party then seeks to hold the employer responsible. For example, an employee injured while working with a machine might file suit against the manufacturer of the machine. The manufacturer might then sue the employer claiming that the cause of the injury was modifications the employer made to the machine or improper use. Another situation where this liability coverage applies is when the spouse of an injured worker sues the employer for loss of consortium.
THINGS THAT CAN BE DONE TO REDUCE WORKERS COMPENSATION INSURANCE COSTS: * Manage Your Risks* Take Advantage of Saving Opportunities
* Be Sure Your Premium is Correctly Figured
* Raise Your Deductibles
* Try to Avoid Assigned Risk
* Coordinate Disability Programs
To Obtain a competitive quote on Workers Compensation, please contact our office today. CONTACT US
