Safe Solutions

Workers' compensation insurance provides employees with compensation for on-the-job injuries and protects your business from lawsuits.

There are two parts to a standard workers' compensation policy, and it is a good idea for you to be familiar with them.

Statutory workers' compensation

The first part of your workers' compensation policy corresponds to your state's statutory workers' compensation laws as specified on your policy's information page. Each state in which your company operates should be listed on the page.

All states have their own statutory workers' compensation statutes, and no two are exactly alike. However, all agree on a fundamental concept: To be covered, an injury or illness must arise out of and in the course and scope of employment.

This is a simple concept when your employees work at a fixed location on a "9 to 5" schedule and are injured while working in an office or manufacturing environment.

However, you may have crews traveling to work on projects for weeks at a time. And you probably pay for your crews' accommodations and dining expenses.

If your crew members were out of town and one fell on the way to dinner and broke his or her ankle, the employee would be covered under your workers' compensation policy because he or she was still in the course and scope of employment while going to dinner.

But if after dinner another crew member went to visit some friends in the area and suffered the same type of injury, your workers' compensation insurer likely would deny this claim, stating visiting friends does not arise out of the course and scope of employment.

Typical statutory compensation under a workers' compensation policy includes replacement of lost wages, compensation for economic loss, reimbursement or payment of medical expenses and benefits payable to a worker's dependents in the event the worker is killed during the course of employment. A fixed schedule is provided to calculate the amount and form of compensation based on different injuries.

Employers' liability

The second part of a standard workers' compensation policy focuses on employers' liability and covers you for liability arising out of your employee's injury in the course of employment that is not in the scope of statutory workers' compensation coverage. This part of the policy is similar to a commercial general liability policy (CGL) and fills the gaps of your policy's statutory workers' compensation section and CGL-related exclusions.

The employers' liability section requires negligence to be proved by the injured party and has a specific limit of liability. Additionally, you can purchase an umbrella policy, which provides excess liability limits above those of your CGL, business auto policy and the employers' liability section of your workers' compensation policy.

An example of a type of claim covered under this section sometimes is referred to as a "third party over" or "liability over" lawsuit. This type of lawsuit occurs when a third party brings a suit against you because of an injury to your employee who filed a claim against the third party.

Other types of claims could include:

• An injured employee's spouse suing for loss of care and services
• A spouse of an employee killed on a job site suffering a heart attack upon learning of his or her spouse's death
• A dual-capacity lawsuit in which your employee sues you as a product manufacturer rather than his or her employer

Know your coverage

Knowing your coverage is important in the event a claim situation arises. Be sure to contact your insurance producer or broker if you have a claim, and include this policy in your annual review.

Leslie Kazmierowski, CPCU, is NRCA's insurance programs manager.

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