Guide to Workers’ Compensation Assignment

Guide to Workers’ Compensation Assignment
Guide to Workers’ Compensation Assignment
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From History through Audit
Christopher J. Boggs
CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS
© 2011 by Wells Media Group, Inc.
All rights reserved.
First edition published 2009.
Printed in the United States of America
ISBN: 978-0-578-02096-9
Contents 1 Workers’ Compensation History: The Great Tradeoff! ………….. 1
2 On-the-Job Injury: The ‘Course and Scope’ Rule …………………. 7
3 Gray Areas in ‘Course and Scope’ Injuries …………………………. 17
4 Occupational Disease and Workers’ Compensation
Protection……………………………………………………………………….. 22
5 Benefits Provided Under Workers’ Compensation Laws ……… 28
6 Second Injury Funds: Are They Still Necessary or Just a
Drain On the System? ………………………………………………………. 35
7 Who Qualifies as an ‘Employee’ in Workers’ Compensation
Law? ……………………………………………………………………………… 43
8 The General Contractor’s Responsibility to Provide
Protection……………………………………………………………………….. 48
9 Contractual Risk Transfer and Workers’ Compensation ……….. 52
10 Employees Exempt from Workers’ Compensation ……………… 58
11 Extraterritorial Considerations – When to Add a ‘3.A.’ State … 65
12 The Surprising Importance of Employers’ Liability Protection 78
13 Nonemployee ‘Employees:’ The Borrowed Servant Doctrine .. 97
14 Work Comp for PEOs and Their Client/Employers …………… 109
15 Combinability of Insureds ………………………………………………. 115
16 Audit Rules and Guidelines …………………………………………….. 122
17 Audit Problems Leading to Additional Premiums …………….. 134
18 A Primer on the Workers’ Compensation Experience
Rating Worksheet ………………………………………………………….. 138
Appendix A: Workers’ Compensation Coverage Checklist ….. 162
Appendix B: Selected Workers’ Compensation Laws from
all 50 States …………………………………………………………………… 165
Appendix C: NCCI’s Workers’ Compensation Policy …………. 181
Appendix D: Workers’ Compensation Endorsement
Listing and Description …………………………………………………… 188
Appendix E: First Report of Injury Requirements for all
50 States ……………………………………………………………………….. 198
Appendix F: Glossary …………………………………………………….. 206
Author Biography ………………………………………………………….. 216
1
Chapter 1 Workers’ Compensation History: The Great
Tradeoff!
Eighteenth century pirates and a nineteenth century German
“Iron” Chancellor preceded the United States in the creation of a so-
cial system for the protection of injured workers. The modern work-
ers’ compensation system owes parts of its existence to this unique
parentage.
Arrrrgh, I’m Hurt!
Pirates, contrary to popular myth, proved to be highly organized
and entrepreneurial. Prior to their assignment to the ranks of outlaws,
they were considered highly-prized allies of the government; plun-
dering and sharing the spoils with governors of the pre-
Revolutionary colonies giving them a safe port.
Privateering (the gentlemen’s term for piracy) was a dangerous
occupation; taking booty away from those who did not want to give
it up leads to sea battles, hand-to-hand combat and injury. Because of
the ever-present chance of impairment, a system was developed to
compensate injured “employees.” There was one catch: he or she
(there were female pirates, as well) had to survive the wounds to col-
lect benefits as there was no recorded compensation for death.
Piratesinfo.com provides some information regarding the amount
of payment made to the injured:
? Loss of an eye – 100 pieces of eight (Spanish dollar);
? Loss of a finger – 100 pieces of eight;
? Loss of left arm – 500 pieces of eight;
? Loss of right arm – 600 pieces of eight;
? Loss of left leg – 400 pieces of eight; and
? Loss of right leg – 500 pieces of eight.
Chapter 1 – Workers’ Compensation History
2
Average weekly wage for colonial Americans of this period
equated to approximately two pieces of eight per week. Loss of an
eye or finger would merit payment approximating 50 weeks of wag-
es. The right arm was worth 300 weeks (a little less than six years).
These compare rather closely to modern compensation schedules.
In addition to being compensated, injured crew members were
allowed to remain on board and offered less strenuous duty. This was
the creation of the first return-to-work program.
Marxism, Socialism and Workers’ Compensation
Otto von Bismarck, the “Iron Chancellor,” introduced Workers’
Accident Insurance” in 1881. Phased in between 1881 and 1884, the
program became the model for workers’ compensation programs in
Europe and ultimately America.
Bismarck was not known as a socially-conscious ruler; the work-
ing conditions of the common man were not necessarily foremost in
his mind. History teaches that his main concerns were the unification
and growth of Germany (Prussia) and the protection of his position.
But Bismarck’s main political rivals were Marxists with socialist
agendas — a feigned concern for the plight of the common man. On
the top of this agenda was the creation of a social program for the
protection of workers injured on the job, a workers’ compensation
program.