Running head: COMPENSATION AND EMPLOYER LIABILITY INSURANCE 1

Compensation and Employer Liability Insurance

Name

Institution Affiliate

Course

Date
COMPENSATION AND EMPLOYER LIABILITY INSURANCE 2

1. Describe worker compensation statutes in terms of those common characteristics

Basic purpose The primary purpose of the worker compensation is to provide employees

who are injured on duty insurance coverage cover for the lost income, medical care and

any other rehabilitation that may restore the worker welfare. The statutes do not require

proof of fault to obtain the benefits.

The benefit provided The worker compensation is aimed to benefit workers with

workplace injuries that severe enough to prevent a worker from resuming his/her duties

either temporary or permanently. The benefits may include medical cost, compensation

for lost wages or rehabilitation to restore the worker to a former state.

Persons and employments covered worker compensation Every employee is entitled

to worker compensation benefits under the Worker Compensation Act apart from

Crewmembers on vessels and interstates railroad workers. The crewmembers can use

Longshore and Harbor Workers Compensation Act to sue their employer for work-related

injuries and illness.

2. Describe worker’s compensation statutes in terms of those common characteristics

Extraterritorial provision Each States addresses whether benefits provided by the

workers’ compensation extend to injuries sustained in a different States. Some states

outline the maximum amount of time an employee who can receive worker compensation

benefit can spend outside the domicile state or state of hire.

COMPENSATION AND EMPLOYER LIABILITY INSURANCE 3

Federal Jurisdictions, the jurisdiction governs which State law applies in regards to

whether or not workers’ compensation is the exclusive remedy and whether the employer

is indemnified from civil immunity.

The method for meeting employer obligation the workers’ compensation is

administered on the state by state bases. The employer is supposed to cater for all

worker’s compensation premium for the policy and preclude employee lawsuit against

the employers.

3. Summarize these section of the worker compensation and Employer Liability

Insurance Policy

Information Page The information page provides the personal details of both the

employer and the employee. The information captured are, employer name Identifying

number, their address and form of their business

The General Section; the general section states the employer liability terms. The section

contains the limits of the policy liability to each employee. Besides, the general section

may outline the states which the worker insurance applies.

Part One –Workers Compensation Insurance this section stipulates the benefit that an

insurer will provide the covered employees. The insurer agrees to pay all workers

compensation benefits that the employer must legally provide. The insurer must indicate

that the employer is solely responsible for payments over the benefits generally provided

by the workers’ compensation statutes.

4. Explain why an employer’s liability insurance is needed and how the Workers’

Compensation and Employer Liability Insurance Policy address the need. The

Employer Liability and Workers Compensation are two insurance policy required by the
COMPENSATION AND EMPLOYER LIABILITY INSURANCE 4

employer to cover liability arising from worker compensation law and employee work-

related injuries and illness. The workers’ compensation benefit is limited to employees’

medical bills and partial loss of wages. However, the employers’ liability covers

additional cost if an employee sue employer for other benefits. The Employer Liability

Insurance covers the attorney’s fees, the court cost and settlement or judgment.

5. Describe the purpose and operation of Part Three- Other States Insurance in the

Workers Compensation and Employer Liability Insurance Policy. Part three of the

Worker Compensation and Employer Liability states that employer can face worker

compensation claim under the law of other states. An example is when an employee is

injured while on a business trip in states that were not covered in the worker

compensation policy. Moreover, the section applies to companies that have their

operations in different states.

6. Describe the need for the coverage provided by each of the following endorsements:

Voluntary Compensation and Employer Liability Coverage Endorsement.

Voluntary compensation Endorsement is an insurance policy aimed at covering worker or

employees who have not been covered by the States Workers Compensation Act. The policy

allows the employer to extend the benefit provided by the act to employees working less than 40

hours a week for a single employer. The workers include; casual workers, Agriculture employee

and gardeners. Voluntary compensation endorsement requires that the insurer pay a statutory

benefit to the insured person in exchange for victim releasing the employer and insurer from
COMPENSATION AND EMPLOYER LIABILITY INSURANCE 5

further liability. The employer needs voluntary compensation to cover the risk associated with

injury and illness from non-permanent employees.

On the other hand, employer liability coverage endorsement covers the employers from

financial loss in case a worker has a job-related injury, illness or any other loss not covered in

worker’s compensation. When an injured employee feels that the employer’s negligence caused

the injury, he or she can sue for additional damages; the employer liability shields the employer

from attorney fees, court costs and settlement or judgement.

Longshore and Harbor Workers Compensation Act Coverage Endorsement

In 1927 the Congress passed Longshore and Harbor Workers Compensation Act

(LHWCA) to compel the employer to provide both compensation and medical benefits to any

employee in maritime employment who suffer work-related injury or illness in the line of duty.

The Act covers the worker on offshores and those involved in loading the vessels. The LHWCA

helps dock builders, marine contractor to reduce the cost associated with the maritime injury.
COMPENSATION AND EMPLOYER LIABILITY INSURANCE 6

7. Explain how Premium bases, classification, and premium adjustments affect the

rating of worker’s compensation insurance.

Premium bases can be defined as underwriting expenses, profit and adjustment for the

insurance charge for a policy. The premium base is used to calculate the premium for

reinsurance. A company base premium is calculated by dividing the payroll in a particular job

with 100. The rationale for basing premiums on wages is that worker’s compensation benefits

depend on claimant’s earnings and the inherent risk.

On the other hand, the classification of the system enables the distribution of the cost of

insurance equitably among employers. Employers with vulnerable workers’ pay higher

premiums compared to employers with low-risk employees. Besides, the classification systems

assume that worker working in the same industries and the same type of job are susceptible to

same kinds of injuries. For instance, all employers that offer roofing installation are classified in

the same compensation category.

Lastly, before the insurer approves the policy, they may carry an assessment to determine

whether particular classes of policyholders are more vulnerable to claims. The evaluation helps

the insurer to determine the risk associated with the specific policyholder. If the risk is high to a

particular employer, the insurer increases premium adjustment and therefore affecting the rating

of worker’s compensation insurance.

8. Given a case, determine whether the Worker Compensation and Employer Liability

Insurance Policy cover a described injury or illness and if so, what types of benefits

or what amount of damages is covered.

Most states in the United States require employers to purchase worker compensation

insurance. The employer is indemnified from liability when the employee receives benefits after
COMPENSATION AND EMPLOYER LIABILITY INSURANCE 7

injury or illness caused on duty. However, non-occupational injuries and illness are not covered

by worker compensation. The insurer agrees to cover all worker compensation benefits that

employer must legally provide to covered employees who have job-related injury and disease. In

some cases, an employer can be held liable for benefits that exceed regular workers’

compensation benefits. The damages recovered from the insurer should be sufficient enough to

cover medical care and rehabilitation services to an injured worker.

COMPENSATION AND EMPLOYER LIABILITY INSURANCE 8

Reference

Cox, S. R., & Quirk, T. R. (2010). U.S. Patent No. 7,742,937. Washington, DC: U.S. Patent and

Trademark Office.

Oliphant, K., & Wagner, G. (Eds.). (2012). Employers' liability and workers' compensation (Vol.

31). Walter de Gruyter.

Sengupta, I., Reno, V. P., Burton Jr, J. F., & Baldwin, M. L. (2012). Workers’ compensation:

Benefits, coverage, and costs, 2010. National Academy of Social Insurance.