compensation insurance. There are interpretations in many states now that support independent contrac- tors being treated as employees of the firm that hired them, which might mean employers are liable for injuries while work is being done for them. Other triggers exist that may be based on the number of employees or specific instances of work being performed on your behalf. In any case, workers compensation insur- ance provides a predictable out- come for employees and employers, although there are a few exceptions. Exclusive Remedy Versus Employer Liability Workers compensation is gener- ally intended to function as “exclusive remedy” for on-the-job injuries. This is by design, and an extension of, the no-fault nature of workers compensa- tion. However, there are certain cir- cumstances where “exclusive remedy” may not apply. Of course, this too can vary from state to state. General guidelines, for when an employee can seek to recover from an employer outside of workers compensation, include intentional or deliberately harmful acts by an employer, claims not covered within workers compen- sation (such as psychological injury), deliberate concealment by an em- ployer, or lack of a workplace work- ers compensation insurance policy. Although these instances, and others on a state-specific basis, may not be covered under workers compensa- tion, most policies include provisions for an extension to coverage called employer’s liability. Employers’ li- ability—also called Part 2 of a work- ers compensation policy—provides Aviation Business Journal | 1st Quarter 2016 coverage for an employer’s liability to employees for work-related injury outside ordinary workers compensa- tion law. Unlike a workers compen- sation claim, an employer’s liability claim must demonstrate negligence on the part of the employer. Where a claim outside workers compensa- tion is proper, employer’s liability coverage can provide for defense costs as well as compensation for injuries to an injured worker, and in some cases, to the worker’s fam- ily on behalf of the employer. Benefits and Coverage The most general test for whether or not injuries fall under the coverage afforded by a workers compensa- tion policy is whether an injury was sustained during the “course and scope of employment.” As simple as this may appear on the surface, considerable law exists debating what activities and injuries fall within the course and scope of employment, and if you guessed that these differ between states, you are absolutely correct. Although it isn’t at a specific work site, an employee injured in a traffic accident while in a vehicle for work purposes is generally consid- ered to be a compensable loss. Not all workers compensation losses are specific injuries, and a rather large number relate to cumulative oc- cupational diseases, such as back injuries, carpal tunnel disease, or neurological disorders because of repeated exposure to toxic chemicals in the workplace. As with claims of other types, workers compensation losses are handled by licensed insur- ance adjusters. Medically necessary treatment is covered by the policy, as is income replacement based on the nature and expected duration of the injured worker’s disability or impair- ment. Disputes about claim coverage or medical necessity are handled as dictated by the state where the em- ployee was injured, but may involve independent medical examinations or surveillance to determine the extent to which an injury is disabling or compensable. Fraudulent claims are not only illegal, but also expensive, as they can have a negative impact on an employer’s premiums for many years. Premium Calculation Workers compensation premiums are set on the basis of state-specific rating structures in combination with the employer’s industry clas- sification codes and the amount of payroll associated with specific codes. Hundreds of standardized codes have been assigned to correspond to jobs with specific hazards or expo- sures. Ensuring that your employees are properly coded can have a big impact on premiums. Working with an insurance broker or program that understands your specific business can be invaluable in ensuring proper classification. For businesses with premiums over a specific limit, an experience modification factor is also used for premium calculation. In many states, this is determined by the National Council on Compensation Insurance (NCCI), the same entity responsible for classification codes. The experience modification factor, or mod (also called e-mod), is a rate applied to the policy premium in order to reflect claims history. The mod is generally calculated with three Continued on page 16 15
