Workers' compensation

The grand bargain

Before workers' compensation, an injured employee's only remedy was to sue the employer for negligence, and the employer could defend with the old common-law defenses (contributory negligence, assumption of risk, and the fellow-servant rule). Many injured workers recovered nothing. Workers' compensation replaced that system with a trade:

• The employer pays benefits for work-related injury and illness regardless of fault.
• The employee gives up the right to sue the employer. Workers' compensation becomes the

employee's exclusive remedy against the employer.

Florida's statute describes the system in exactly these terms: it "is based on a mutual renunciation of common-law rights and defenses by employers and employees alike," and is meant to deliver disability and medical benefits quickly and efficiently and to return the worker to gainful employment at a reasonable cost to the employer.

What makes a claim compensable

Workers' compensation is no-fault coverage for injury or occupational disease arising out of and in the course of employment. It does not matter who caused the accident; it matters whether the injury is work-related. It does not cover injuries off the job; those fall to the worker's own health and disability coverage. For the same reason, group health and disability policies commonly exclude occupational injuries and illnesses that workers' compensation covers, so the two do not pay twice.

The four types of benefits

1. Medical benefits -- necessary medical, hospital and surgical care, generally with **no

deductible, no coinsurance and no dollar maximum** paid by the worker.

1. Disability income -- a percentage of the worker's wages, subject to state maximums, paid

after a short waiting period. Disability is classified as temporary or permanent and partial or total.

1. Rehabilitation -- medical and vocational rehabilitation to help the worker return to work.
2. Death benefits -- burial expense and income to the surviving spouse and dependents.

How employers provide coverage

Coverage is compulsory for most employers. An employer may secure it by:

• buying a policy from a private insurer authorized in the state;
• self-insuring, if it meets the state's financial requirements; or
• buying from a state fund. In a few monopolistic states, the state fund is the only

source of coverage.

The standard Workers Compensation and Employers Liability policy has two main parts. Part One (Coverage A) pays the benefits the state workers' compensation law requires, with no policy dollar limit. Part Two (Coverage B), employers liability, covers suits that fall outside the statute, such as a claim by an injured employee's spouse, and carries stated limits.

Other points the exam likes

• Extraterritorial coverage. An employee injured while temporarily working out of state

remains entitled to the home state's benefits.

• Managed care and fee schedules. Insurers may deliver care through approved managed care

arrangements, and provider charges are capped by a schedule of maximum reimbursement allowances.

• Disputes and settlements. Contested claims go before a judge of compensation claims,

whose approval is required before future compensation can be discharged by an advance or lump-sum payment.

• Who is not covered. Independent contractors are not employees; many states also exclude or

make optional certain groups such as domestic and farm workers.

Exam tip: Workers' compensation is no-fault and the exclusive remedy. The employer gives up its defenses; the employee gives up the right to sue.