By Paul Z. Martin, CIC, CPCU
Paul Martin is the Director of Insurance Content and Mentorship for the National Alliance for Insurance Education & Research. Paul works with industry professionals to deliver high-quality insurance content and education for the Academy. During his career, Paul worked as an adjuster, underwriter, special agent, company manager, and independent agent. Paul has been an insurance educator in Texas for over twenty years.
Workers compensation is a weird type of insurance. For over a century, it has established itself as a distinct species within the insurance ecosystem, bearing little resemblance to its auto insurance or general liability counterparts.
Historically labeled “workers’ compensation,” the industry evolved in the 1990s to eliminate the possessive apostrophe, eschewing confusion, and embracing the notion of plurality over possession.
The Claims Process and the Role of the Employer
Unlike typical legal claims arising from incidents such as automobile accidents where two parties face off in court, workers compensation insurance introduces a different dynamic. Those outside of the insurance realm may find it surprising that when an injured worker files a workers compensation claim, their grievance is essentially with the insurance carrier rather than with their employer directly. This distinction is emblematic of workers compensation’s idiosyncratic approach.
The jurisdiction of workers compensation is grounded in statutory law as opposed to common law. Predominantly, when employers procure workers compensation policies, the law safeguards them from litigation initiated by the injured worker through the doctrine known as “exclusive remedy.” The implications are significant: it is the insurance provider that fulfills the obligations to the injured workers, not the employer, ensuring a delineated and protected framework for managing workplace injuries.
Defining the Employee within Workers Compensation
The parameters that define an “employee” eligible for workers compensation benefits are also defined by statutory legislation, not by broad, universal standards. The criteria for what constitutes an ’employee’ can vary considerably. For instance, certain states mandate a minimum number of employees before the workers compensation statute applies, adding a layer of complexity to understanding and managing these policies. Hence, the law within each state meticulously characterizes employee eligibility, necessitating a nuanced understanding by employers and risk management professionals.
State-Specific Workers Compensation Statutes
The intricacies of workers compensation further unravel at the state level. Each state crafts its own regulations influencing employers and employees within its borders. This creates a patchwork of statutes and regulations that affect everything from payroll classifications to premiums, from benefits to policy nuances. Insurance professionals must navigate these diverse landscapes, underscoring the importance of the “Information Page” in workers compensation policies—akin to the declarations page in other policies—which can be crucial in determining the bounds of coverage.
The divergence among state laws underscores the vital importance for respective agents to possess a comprehensive knowledge to ensure adequate coverage and compliance. Understanding these details not just showcases the peculiarities of workers compensation insurance but also reinforces the significance of specialized expertise in the field.
Better Understand Workers Compensation Insurance
The self-paced Workers Compensation course introduces participants to the workers’ compensation system, examines how state statutes create the need for insurance, and how the insurance responds.
Images generated using OpenAI. (2024). ChatGPT [Large language model].
