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Workers' comp insurance coverage is the exclusive remedy.
When an employee gets injured on the job, workers' compensation insurance provides what's known legally
as an exclusive remedy. A business that has coverage under an active policy will not
be held liable for job-related injuries except under narrow legal circumstances whereas the employer
intended to cause injury to the employee or they were willfully negligent.
Prior to federal and state workers' compensation laws in the United States,
employees who were injured on the job had no formal process to compensate
them for injuries sustained while working for an employer. The only recourse for the
injured employee was to sue the business owner under civil or tort law.
Furthermore, the employee would have the burden of proving malice or negligence against the owner in order to
receive compensation for the cost of medical expenses and lost income due to injuries. Even though the business'
potential liability was limitless, most U.S. courts ruled in favor of the business owner. This left employees to
cover their own expenses including lost wages, medical costs, and lost future earnings.
Originally, the federal government assumed that workers' compensation laws should be left to individual states to enact; but in
1908, President Taft signed the first legislation requiring mandatory employer coverage for employees working in
multi-state commerce. During the next 40 years, each state enacted their own state-specific programs and
workers' compensation laws. Wisconsin was the first state to establish a formal workmans comp program and
Mississippi was the last state.
Legally requiring workers' compensation coverage brings advantages to both employers
and employees alike. The basis of the work comp legal system is built around the Prussian
concept of "no fault" insurance. This concept generally means that on the job
injuries are an accepted fact and a part of doing business. The purpose of our workers' compensation system is
to help manage the financial consequences of accidents in the most efficient and
judicious manner possible. The concept of no-fault was later applied to auto
insurance as a means of limiting litigation for car accidents.
The primary benefit for business owners participating in a states' workers' compensation
program is that they have tort exemption, or legal protection, from injuries that are covered under a
workers' comp policy. The insurance company will pay for the cost of medical care and it will replace lost wages
for employees injured on the job.
Employees benefit when a business has coverage because they do not have to prove that the an employer was
negligent. Employees receive financial compensation for injuries that occur through their own carelessness or
occupational exposure without the burden or expense of filing a a lawsuit against their employer.
Under the current workers' compensation system, employees receive compensation more quickly and more often than
employees without access to workers' comp coverage.
The business owner, or employer, pays the cost of providing coverage for employees. The cost of a policy is based
on payroll and the class code the job duties fall under. A policy lasts for one year. State insurance regulations
dictate each states own workers' comp requirements. Most state laws require coverage as soon as the business hires
its first employee. Their are allot of additional rules associated with when and how owners and employees must be
covered in each state. They can
purchase it through private insurance companies or through state insurance funds. Most states also have additional
injury funds established to pay for injuries of uninsured employees under certain circumstances.
Employers liability is a coverage that is generally included under a workers' compensation policy. There are two
parts to the contract under a workers' comp policy. Part 1 is workers' compensation and Part 2 is employers
liability. Employers liability provides additional legal protection to businesses that have coverage. In the event
an employer is sued by an employee or there family, the policy wll pay for legal defense costs and court judgments
against the employer. The insurance company may also negotiate and pay settlements
Employers Liability is very seldom utilized in most states. It makes up a very small part of the cost of coverage
because its seldom needed. The minimum employers liability limits in most states is:
Many business pay a small amount of additional premium in order to increase these limits. This is typically due to
contractual requirements or in order to satisfy their umbrella insurance carrier.
Want more information about employers liability?
What is Employers Liability Insurance?
Does Workers' Comp Coverage Vary From State to State?
Yes. Workers' compensation laws and coverage requirements vary significantly from state to state. Since each state
administers their own workers compensation systems, there
may be important differences in how each state interprets theirs own laws and statutes
with regard to both coverage requirements and insurance benefits for injured workers. The federal government also
has its own system for federal employees and utilizes its own rules and requirements for
The primary differences between each states' workers' comp rules include:
The number of employees a business can have before coverage is required will range from the very
first employee hired up to 5 employees. In some states construction companies can be required even when they don't
The treatment of owners and family members will be affected by whether the business is an
individual, sole-proprietor, partnership, LLC or corporation. Some owners will be automatically excluded and
others will be included by default. Some states have strict requirements and documentation rules for owners who
choose to opt-in or opt-out of coverage.
Most states use standard NCCI class codes. A few states, like California and Pennsylvania, utilize their own classification systems and codes.
All states have other unique variations known as state special codes. These are either unique class codes
to the state or a variation of how job duties are applied to another class code.
Most states allow private insurance companies. Carriers must apply for approval and file their
rates with the state for each class code. There are four monopolistic states that prohibit private insurance
companies: Ohio, North Dakota, Washington and Wyoming.
Most states utilize NCCI to place state fund coverage with a pool of insurance companies
operating in the state. Other states, like New York and Florida, operate their own state funds. A few states like Missouri contract with a specific insurance company to administer the
Workers' compensation is more complex than most business owners realize. Most states allow
insurance companies to apply credits and debits to adjust premium. The typical range is 25% deviation with regard
to a policy credit or debit.
Each states mandates the award schedules and maximum time for disability payments in
order to standardize how insurance companies must compensate employees, or families, when they become disabled or
die from workplace injuries. In Virginia for example a thumb-related
injury could pay disability payments for up to 60 weeks. A severed pinky finger could result in a cash settlement
of $10,500 for permanent loss of use.
What States Require Workers' Compensation?
Every state in the U.S. requires workers compensation with the exception of Texas. Requirements are based on the
number of employees and vary between 1 and 5 employees. Texas allows business owners to opt out of workers'
compensation, but employers may still be held liable for uninsured claims and employee injuries.
Business owners that do not carry workers' comp, when it is required by law, often face stiff fines and penalties
by the state. They may also be held liable for replacing employees' lost wages and paying medical expenses for
Failing to provide workers' compensation is a criminal offense in most states. Fines range from $1,000 to over
$100,000 depending on the state and circumstances. An owner may also serve up to 7 years in jail for failure to
comply with state laws.
Why Workers' Compensation Insurance is the Best
Workers' compensation is not a perfect system. In fact, it can be somewhat
confusing because of individual state laws and statutes. It is still an
American success story. It is a much better system than the United States had prior
to modern workers' compensation legislation and reform. Business owners receive
relief from employee related lawsuits (also known as exclusive remedy) and employees get a fast
and equitable, no-fault program to compensate them workplace injuries.
Call One of our Workers' Comp Specialists at 888-611-7467, or
Find your best workers compensation quotes. It takes 3 minutes.
Workers' compensation insurance is a property and casualty insurance product legally required for most business
owners when they hire one or more employee(s). A policy will protect a business from lawsuits related to employees
who become injured or ill on the job. It will also pay for medical care and replace a portion of missing payroll
wages when employees are unable to work due to an accident.
The cost of this insurance is always paid for by the business. A policy helps keeps your business compliant with
state regulations. Premium and rates are based on gross employee payroll and the class codes used to classify job
duties and the nature of the business.
Each state has their own laws and requirements that guide the legal system and define how coverage works. State
insurance regulators establish the rules and determine how much and how long insurance companies must pay for
claims related to workplace injuries.
The exclusive remedy provision protects business owners from being sued by an employee for work-related injuries
when business provides coverage under a workers' comp insurance policy. This doctrine limit the legal options of
an employee except under narrow circumstances where the business was grossly negligent. All states now have
exclusive remedy provisions that apply to their workers' compensation
The meaning behind the exclusive remedy clause is to force a compromise between
employers and employees. Employees give up the ability to win large suits against
employers in order to receive fast and limited financial return. Employers exchange
liability regardless of fault, for legal protection from potentially devastating
tort judgments in court.
In some instances where gross negligence is likely, most states will allow legal
proceedings against employers regardless of exclusive remedy rules in the state.
Save 30% on work comp for select businesses
How do I get started?
Workers' compensation is managed separately by each state. Our agency helps business owners find more affordable
employers liability and workers' comp insurance by shopping your coverage with companies that offer lower rates and
more policy credits for your business class codes.
Private insurance companies have different appetites and underwriting guidelines depending on their performance in each
state. Workers' comp rates and pricing can vary tremendously from one carrier to the next. We're here to help you find
the very best deal on coverage in your state.
If you have questions about your coverage or you think you might qualify for lower rates, contact one of our
Specialist for a free no-obligation policy review. Talk to an expert at 1-888-611-7467
M-F, 8-5 CST.
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