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What is Workers’ Compensation?  

Workers' comp is a form of insurance that provides for the payment of medical care and/or to provide cash benefits to the injured employees as a result of work related injuries or illnesses. The cost of the insurance is borne solely by the employers and most states require this form of compulsory coverage for organizations with employees.  The tradeoff for providing this benefit to the workers is that the worker forfeits their right to claims against the employer–at least in theory.  

Workers’ Compensation provides two parts; Part A provides the benefits to pay for the lost time and medical expenses related to the worker’s injuries or illnesses, and Part B which provides Employers Liability protecting the employer from third party claims due to their negligence and the breach of their duty to provide a safe working environment to the injured worker or the family members.  

To enforce, govern, and regulate workers’ compensation, agencies are generally set up in each state, known as Workers’ Compensation Boards. These state entities can also be responsible to oversee and ensure the payment of claims to injured employees and sometimes to their family members that become ill from communicable diseases.  Examples of of the latter were spotlighted by the ongoing asbestos claims in the 1970’s.          

The payment of benefits from workers’ compensation are considered to be no-fault and are generally not subject to other judicial or punitive awards that are common with civil and criminal cases.  Benefits can be paid once it assumed the injury or illness was work related.  This usually follows a process of filing a claim form by the employer.  

If the employer disputes the nature of the claim or if it was work related, a hearing may be requested to allow a workers compensation law judge to make the determination.  During this process, the judge may review the documents and reports from the employer, testimonies from employees and others, evaluate evidence, and/or examine medical documents to determine the cause of injury. The injured worker can lose their rights for benefits if the injury is determined to be unrelated to work, or due to intoxication, acting in an illegal manner, or caused by their own intent.  

Compensation benefits amounts or remuneration vary by state, but usually never exceed two thirds of the earned income lost as a result of the injury. In addition to capping the remuneration, most states limit the length of time compensation payments are made.  Settlement amounts can be offered to quantify the loss, limit the exposure, and expedite the closure of the claim.

By William F. Schaake, CIC, CRM, CLCS © 2016

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