Workers Compensation Insurance

Workers Compensation

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This coverage agreement obligates the insurer to pay all compensation and other benefits required of the insured by the workers compensation law or occupational disease law of any state listed in the policy. The coverage applies to bodily injury by accident and by disease. Coverage (A) shows no dollar limit for the benefits provided since any applicable limits would be those established within the law. Benefits under coverage (A) are paid to the employee without regard to fault. Workers Compensation insurance provides for workers’ compensation, employer’s liability, and voluntary compensation coverages.

Workers Compensation insurance provides for workers’ compensation, employer’s liability, and voluntary compensation coverages.

Terms Defined

Part 1

Workers Compensation insurance coverages are defined by each state. The state’s Industrial Commission is the controlling body. It provides medical and disability coverage for on-the-job injuries or work related illness. In many states principals such as owners, officers and partners can exclude themselves from worker’s compensation coverage.

Part 2

Employer’s Liability – provides coverage that protects the company in the event that an employee alleges that the employer’s negligence or failure to provide a safe workplace was the cause of the employee’s injury or illness.

Part 3

Other States Insurance. This refers to states not listed in Part 1 where the applicant has the potential for operations during the policy term, but none currently exists as of the effective date of the policy.

Bodily Injury

1. By Accident

This amount is the most an insurer will pay under coverage (B) for all claims arising from any one accident, regardless of how many employees are involved in the accident. The standard limit, which can be increased, is $100,000 for any one accident.

2. By Disease (Policy Limit)

This is the aggregate limit the insurer will pay under coverage (B) for all claims sustaining bodily injury by disease during the policy period. The standard policy limit, which can be increased, is $500,000.

3. By Disease (Each Employee)

This amount is the most an insurer will pay under coverage (B) for damages due to bodily injury by disease to any one employee. The standard limit of liability, which can be increased, for each employee is $100.000.

 Care, Custody and Control

Care, custody and control is a phrase used in liability insurance policies to eliminate coverage for damage or destruction to property under the care, custody, and control of an insured.

Coverage for property in your care, custody or control is excluded because the insured either has some ownership interest in the property or is a bailor of the property.

In these situations it is not that you can not insure these exposures, but they are simply more correctly insured separately under other forms. Property that you have an ownership interest in is normally insured through a property insurance policy. Property you are a bailor for is normally insured through a bailee policy.

Combined Single Limits vs. Split Limits

Liability insurance limits for Bodily Injury and Property Damage coverage may be purchased either under a single limit for both, or a separate (split) limit for each.


Combined single limit may be $500,000.00 for both Bodily Injury and Property Damage.

You are liable for an accident causing $300,000 of medical bills and $200,000 of property damage. Since the combined damages are equal or less than the combined single limit of $500,000, your insurance pays all the bills.

Split Limits may be $250,000 per person and $500,000 per occurrence for Bodily Injury and $100,000 per accident for Property Damage.

You cause the same accident. If the $300,000 in medical bills are for a single person, your insurance will only pay $250,000. Since you have only $100,000 in Property Damage, $100,000 is the amount your insurance company will pay.

Optional Coverage – USL&H

United States Longshoremen’s & Harbor Worker’s (USL&H) coverage and Voluntary Compensation coverages may be needed if your employees fall under this classification of work.

This is designed to provide workers compensation benefits to employees who work in maritime employment upon the navigable waters of the United States.

When the USL & HWCA endorsement is added to the standard policy it applies to work done in the states scheduled on the policy and extends the definition of the workers compensation law to include the USL & HWCA.

Voluntary Coverage Endorsement

In most states Workers Compensation laws exempt some types of employment from workers compensation benefits.

The Voluntary Coverage Endorsement amends the standard policy to provide coverage for employees with these exempted occupations from the workers compensation act.

While the endorsement does not make employees subject to the workers compensation law, it does obligate the insurance company to pay, on behalf of the insured, an amount equal to the compensation benefits that would be payable to those employees if they were subject to the workers compensation law of that state.

Partners and Officers Exclusion

Some states allow an insured to include or exclude Executive Officers or Partners, or both, from coverage.

This endorsement lists the individuals not covered under the policy.

Experience Modification

Generally the business has to have been in operation for at least two years under present ownership and the premium must meet or exceed a level which is established by the state to qualify for experience or merit rating.

The Modification is a factor based on your actual loss history which may increase or decrease you premium payments.

About Daniel McKenna

Dan McKenna
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