Insurance Community University Insight on Workers’ Compensation 1

Insurance Community University Disclaimer Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by Insight do not modify or revise insurance policy language. The authors of these materials, Insight Insurance Consultants is a division of Insight Consulting and Management Inc. In providing these materials, Insight assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2011 All Rights Reserved Laurie: Marjorie:

Insurance Community University Your Instructor Today Casey Roberts, ACSR, AFIS, CIC Laurus Insurance Consulting

Insurance Community University Objectives Independent contractors, leased and temporary employees Locations: employer, work sites, hire, residency Third party action over claims and coverage Government contracts Foreign Workers’ Compensation 4

Insurance Community University Workers’ Compensation Overview Required coverageOften straightforward Unique exposures must be addressed 5

Insurance Community University Workers’ Compensation Overview Covers employees Full or part time Lawfully employed or not Most states are compulsory Texas is elective Employers subject to the law must provide benefits according to the statute 6

Insurance Community University Monopolistic States Must purchase statutory coverage through state Cannot extend policies in other states North Dakota, Ohio, Washington, Wyoming and Puerto Rico, U.S. Virgin Islands Add Stop-Gap coverage according to state requirements WC policy or CGL Include as underlyer on Umbrella/Excess 7

Insurance Community University 8 Leased, Temporary Employees and Independent Contractors

Insurance Community University The Act Leased employees Temporary employees Obtain evidence of coverage State statutes vary on requirements for PEO and Client to insure Temp company is direct (general) employer Client can be deemed special employer Often overlooked 9

Insurance Community University Employee v. Independent Contractor Avoidance of WCInnocent misclassificationPenalties can be severe 10

Insurance Community University Employee Definition An employee is a (natural) person who works in the service of another person under an express or implied contract of hire, under which the employer has the right to control the details of work performance – Black's Law Dictionary 11

Insurance Community University IC Definition A person or organization hired to perform services under an express or implied contract – NOT subject to hiring party’s control or manner and means of performing the services 12

Insurance Community University IRS Guidelines for IC Status Previously used a 20-point test Changed in 2010 Now uses three broad areas of criteria 13

Insurance Community University IRS Guidelines for IC (Hired Party) Relationship to hiring party ContractBenefits Definite time period for work Financial control How and when payment is made Makes their own profit/loss Behavior control What when and how work is performed 14

Insurance Community University Worker’s Compensation Control IC provides evidence of current WC coverage If sole proprietor, include statement regarding WC status in contract 15

Insurance Community University 16 Locations: Employer, Work Sites, Hire, Residency

Insurance Community University Multi-state Exposures Benefits typically follow employees temporarily working in other states or countries A state can allow benefits to apply to non-residents 17

Insurance Community University Multi-state Exposures Employees can often select state from which to receive benefits State of hire State of residence State of pay State of injury 18

Insurance Community University Part 3A – Workers’ Compensation List all states in which insured has operations known or expected If the exposure is known or expected, it is intended that such state should be listed on the information page Activates Compensation Laws for those states 19

Insurance Community University Part 3C – Other States Insurance Allows state benefits to apply in all states allowed by law and not named in 3A – Intended only for the unexpected exposure. Work in progress as of inception date will NOT be covered under 3C – MUST be listed in 3A 20

Insurance Community University Part 3C – Other States Insurance Use broad language under 3C “All states except monopolistic states and states designated in 3A.” Without this language – domicile state benefits apply – May be lower than state of injury – Employer will be liable for the difference – Coverage through State Compensation funds extend state benefits only 21

Insurance Community University 22 Coverage Examples

Insurance Community University Employee Hired in State #1 Works in State #2 State #1 Listed in WC Policy 3A #2 Listed in 3A Either state benefits apply #2 Not Listed in 3A / Other States Language in 3C Work started after inception Either state benefits apply 23

Insurance Community University Employee Hired State #1 #1 Listed in 3A / #2 Not Listed in 3A 3C Other States Language Not Included Job started in #2 after inception Employee may file in #1 or #2 and receive benefits allowed in that state Policy pays benefits from #1 If less than those in #2 – the employer will pay the difference 24

Insurance Community University No coverage Employee injured in #2 State #2 Not Listed in WC Policy 3A Other States Language Irrelevant Employee Hired in #2 Before Inception Job In Progress at Inception 25

Insurance Community University 26 Third Party Action Over Claims And Coverage

Insurance Community University Third party over or Action-Over Indemnity Employee has claim against 3rd party Third party tries to recover all or part of the claim from the employer under indemnity or legal theory 27

Insurance Community University Example Employee injured while operating a table saw and sues the saw manufacturer The manufacturer sues the employer claiming employer was negligent in training and supervision and not product liability 28

Insurance Community University Example Injured Sub-contractor employee sues General Contractor for failure to maintain safe premises GC files cross-complaint against Sub for failure to provide proper supervision If Sub agreed to indemnify by contract – coverage applies under CGL No contract – coverage applies under Employer’s Liability 29

Insurance Community University 30 Government Contracts

Insurance Community University Government Contracts Many companies are entering into business relationships with the US Government Defense Base Act coverage is mandatory Some of those contracts involve projects in other countries 31

Insurance Community University Defense Base Act Background Passed by US Congress in 1941 Primary goal – Cover workers on military bases outside the United States Today, after several amendments now includes all public works contracts – Any military installation outside the US – Anywhere outside the US 32

Insurance Community University Defense Base Act Background DBA coverage required for any employee, regardless of their nationality or home country Local nationals or third country nationals are covered under the DBA 33

Insurance Community University Defense Base Act Overview Penalties for failure to provide DBA are severe Failure to procure DBA coverage exposes employers to penalties – Employers are subject to common law suits – No coverage applies – No common law defenses – No need to prove negligence – Claimants or their heirs need only file suit and do not have to prove negligence – Suits are brought in Federal Court 34

Insurance Community University DBA Doctrines The Zone of Special Danger doctrine – Employee’s injury or death arises out of or in the course of employment – The injury takes place in a location where circumstances of employment place the employee in a zone of danger – Injury need to be strictly related to specific job duties 35

Insurance Community University DBA Doctrines The Reasonable Recreation doctrine – Employee’s injury arises out of or in the course of the employer’s furnished, funded or promoted recreational activities – Includes some non-sponsored activities 36

Insurance Community University Coverage Full medical care Weekly benefits - % of salary Re-employment, when possible Education benefits Scheduled benefits Lifetime benefits for lost earnings or earning capacity on non-scheduled injuries 37

Insurance Community University Coverage A D & D coverage – 24/7 most employees – $50,000 U.S. nationals – $25,000 third country nationals – $2,500 local nationals – Some insurers will increase 38

Insurance Community University Who Writes DBA Long list of authorized insurers Majority written through – Ace Marine – Chartis – CNA 39

Insurance Community University 40 Foreign Workers’ Compensation

Insurance Community University Foreign Voluntary Workers’ Compensation “Standard” WC coverage extends to extra-territorial workers May be inadequate to coverage additional risk – Disease – Foreign nationals – Repatriation FVWC provides additional coverage 41

Insurance Community University Foreign Voluntary Workers’ Compensation Policy usually specifies the jurisdictional law that will apply Typically includes repatriation costs and endemic disease Covers U.S. employees while abroad on work, temporarily or permanently 42

Insurance Community University Foreign Voluntary Workers’ Compensation Coverage Covered repatriation expenses Costs to return employee to the US for medical treatment Return of employee’s body for funeral Covered endemic disease expenses Medical costs due to disease that is endemic to that country 43

Insurance Community University Standardized Solutions Foreign Coverage Endorsement, WC – Covers a person hired in the U. S. Working temporarily in a foreign country – Covers BI by accident or disease, including any endemic disease – War, invasion, and hostilities-caused injuries not covered 44

Insurance Community University Standardized Solutions Form WC – Lists the employees to be covered and which state's benefits are to apply to them – Pays the benefits for the listed state to an employee injured in a foreign country 45

Insurance Community University Standardized Solutions Excess Repatriation Expenses, Form WC – Covers the difference between transporting a person under medical care and the normal expenses to have the person travel back to the U.S. 46

Insurance Community University Policy Provisions Extend coverage to include “Travel Assistance” – employees and dependents Include coverage for “foreign nationals” – working for the insured – working outside their country of origin Include Employers Liability – some jurisdictions require this coverage is placed locally 47

Insurance Community University Foreign Admitted WC Many countries require compulsory WC coverage – FVWC does not substitute Admitted v. Non-admitted – Check with international underwriting desk to determine which is required by each country of exposure Can be written stand-alone or with an international package policy 48

Insurance Community University Summary Although the majority of your clients will need standard solutions, some will need extra attention These situations can occur with small, medium or large accounts – Always ask your client about their business objectives and risks for the upcoming year 49