Workers Compensation
Workers compensation is a no-fault system that pays statutory benefits to employees injured on the job. This chapter covers the exclusive-remedy concept, the benefits provided, and the two parts of the standard policy. Benefit amounts are set by each state, but the framework is national.
The No-Fault Bargain
Workers compensation is built on an exclusive-remedy bargain: an employee injured in the course and scope of employment receives defined statutory benefits regardless of fault, and in exchange generally gives up the right to sue the employer for the injury. This provides prompt, predictable benefits to workers while limiting employers' exposure to unpredictable lawsuits. The concept is uniform nationwide, even though each state sets its own benefit levels and administers its own system.
Benefits Provided
Workers compensation provides medical care for the work injury, partial wage replacement during periods of disability (temporary or permanent, total or partial), vocational rehabilitation, and death benefits to surviving dependents. It does not pay for pain and suffering, which are non-economic damages available only through lawsuits. Because it is a scheduled, no-fault system, benefits are limited to these defined categories rather than open-ended tort damages.
Structure of the Policy
The standard Workers Compensation and Employers Liability policy has two main parts. Part One pays the statutory workers compensation benefits the employer owes by law. Part Two, Employers Liability, protects the employer against certain work-injury lawsuits that fall outside the exclusive-remedy system, such as third-party-over actions. Coverage is priced largely on payroll and the classification of the work performed, reflecting the risk of each type of job.