Oregon Property & Casualty Insurance License Exam — All Questions

Workers compensation insurance operates on the principle that benefits for a covered work-related injury are paid:

• a.On a no-fault basis, regardless of who was at fault✓
• b.Only for injuries occurring away from work
• c.Only if the employer is proven negligent
• d.Only if the employee files a lawsuit

Workers compensation is a no-fault system: an employee injured in the course and scope of employment receives statutory benefits regardless of who was at fault, and in exchange generally gives up the right to sue the employer. This trade-off provides prompt, predictable benefits to workers while limiting employers' liability. The concept is uniform nationwide, even though specific benefit amounts are set by each state.

Which of the following benefits is NOT typically provided by workers compensation insurance?

• a.Death benefits to surviving dependents
• b.Partial wage replacement during disability
• c.Compensation for the employee's pain and suffering✓
• d.Medical care for the work injury

Workers compensation provides defined benefits: medical treatment for the work injury, partial wage replacement during disability, rehabilitation, and death benefits to dependents. It generally does not pay for pain and suffering, which are non-economic damages available through lawsuits. Because workers comp is a no-fault statutory system, benefits are limited to these scheduled categories rather than open-ended tort damages.

Under a Workers Compensation and Employers Liability policy, Part Two (Employers Liability) is intended to:

• a.Cover work-injury suits outside the statutory system✓
• b.Cover the employees' own health insurance premiums
• c.Pay the statutory benefits the law requires directly
• d.Provide auto liability for company-owned vehicles

Part One of the policy pays the statutory workers compensation benefits an employer owes by law. Part Two, Employers Liability, protects the employer against certain lawsuits related to workplace injuries that fall outside the exclusive-remedy workers comp system, such as third-party-over actions. Health premiums and auto liability are covered under entirely different policies.

The exclusive remedy concept in a workers compensation system means that an injured employee:

• a.Gives up the right to sue the employer in tort✓
• b.Must prove employer negligence to collect anything
• c.Keeps a separate right to sue for pain and suffering
• d.May choose between benefits and a negligence suit

Workers compensation is a trade: the employer accepts liability without regard to fault, and in exchange the statutory benefit becomes the employee's sole remedy against that employer. The choice describing a separate suit for pain and suffering fails because those damages are not in the benefit schedule and the tort action that would recover them is barred. Proving negligence is exactly what the injured worker no longer has to do.

A sole proprietor who works alongside his own employees asks whether the workers compensation policy covers his injuries. The general answer is that:

• a.He is barred from being covered under this policy
• b.He is covered by the employers liability part instead
• c.He is covered only if he elects coverage where allowed✓
• d.He is covered automatically as an employee would be

Owners, partners and officers are treated differently from employees, and whether a proprietor can be brought under the policy is decided by the law of the jurisdiction, usually through an affirmative election plus a payroll figure entered for rating. Automatic coverage is the wrong idea, because the policy insures employees and an owner is not one. Employers liability answers suits brought by employees, not the owner's own injury.

Which workers compensation benefit category pays to retrain an injured worker for a different occupation?

• a.Survivor benefits
• b.Medical benefits
• c.Disability income benefits
• d.Rehabilitation benefits✓

The four benefit categories are medical, disability income, rehabilitation, and death or survivor benefits. Rehabilitation covers physical restoration and also vocational services such as retraining and job placement when the worker cannot go back to the old job. Disability income only replaces part of the lost wage; it does not buy schooling or placement services.

An employee is killed in a covered work accident. Workers compensation death benefits are paid:

• a.To whichever beneficiary the employee named in writing
• b.To the estate as a sum equal to lifetime wages
• c.To surviving dependents, plus a burial allowance✓
• d.To the employer, to offset its lost production

Death benefits run to the people the compensation law defines as surviving dependents, most often a spouse and minor children, together with an allowance toward burial expenses. The answer about a named beneficiary describes life insurance, where the policyowner picks who is paid; a compensation statute fixes the recipient instead. Nothing is payable to the employer for lost production.

A warehouse worker breaks a leg on the job, cannot work at all for ten weeks, and then returns to his old job fully recovered. His disability is classified as:

• a.Temporary partial disability
• b.Temporary total disability✓
• c.Permanent total disability
• d.Permanent partial disability

Temporary means the impairment is expected to end, and total means the worker can perform no work while it lasts. Both are true here, so this is temporary total, the classification behind most indemnity payments. Temporary partial would describe a worker who comes back at lighter duty and lower pay while still healing, which is not what happened.

A machinist permanently loses the use of two fingers but returns to full-time work at the same wage. The claim is treated as:

• a.A permanent partial disability✓
• b.A temporary partial disability
• c.A permanent total disability
• d.A rehabilitation-only claim

Permanent partial means a lasting impairment that still leaves the worker able to engage in gainful employment, and a scheduled award for the loss of a specific body part is the classic example. Permanent total would require that the worker be unable to return to gainful work at all. Wages holding steady does not turn the file into a rehabilitation-only claim, because the impairment itself is compensable.

Part One of a workers compensation and employers liability policy shows no dollar limit of liability because:

• a.The limit for it is shown in the employers liability part
• b.The insurer pays whatever the compensation law requires✓
• c.The employer agrees to pay any excess out of pocket
• d.The insurer caps payment at the estimated annual payroll

Part One is a promise to pay the statutory benefits, and because the legislature fixes those benefits the insurer cannot put a ceiling on them. The limits carried in the employers liability part are separate and apply to suits, not to statutory benefits. Payroll is the basis on which premium is rated, not a cap on what an injured worker can receive.

Part Three, other states insurance, of the workers compensation policy responds when the employer:

• a.Begins work in a listed state mid-term✓
• b.Is sued by an employee instead of paying benefits
• c.Ships goods to customers in several other states
• d.Hires an employee who lives out of the home state

The other states item names jurisdictions the employer might expand into; if operations start in one of them after inception, Part Three provides coverage until that state is properly added to the policy. It does not respond to a lawsuit brought by an employee, which is the job of employers liability, and it has nothing to do with where goods are shipped or where a worker happens to live.

An injured employee collects compensation benefits and then sues the maker of the machine that hurt him. The manufacturer sues the employer, claiming the employer misused the machine. That suit against the employer is covered by:

• a.Part One, statutory benefits
• b.The manufacturer's product liability policy
• c.Part Two, employers liability✓
• d.Part Three, other states insurance

This is a third-party-over action: the employee sues an outsider, and the outsider then turns on the employer for indemnity. Because the demand against the employer is a liability claim rather than a benefit claim, employers liability responds. Statutory benefits cover only what the compensation law owes the worker, and the manufacturer's own policy defends the manufacturer, not the employer it is suing.

A contractor has $400,000 of payroll in a class code rated at $2.50 per $100 of payroll and an experience modification factor of 0.90. Before other adjustments, the premium is:

• a.$3,600
• b.$10,000
• c.$9,000✓
• d.$11,000

Compensation premium starts with payroll divided by 100 times the class rate: 4,000 units at $2.50 is a manual premium of $10,000. The experience modification then applies, so $10,000 times 0.90 is $9,000. The $10,000 figure ignores the credit mod, $11,000 treats a 0.90 mod as a ten percent surcharge, and $3,600 leaves the class rate out of the calculation entirely.

The experience modification factor applied to a workers compensation premium rewards an employer whose:

• a.Employees carry their own health insurance
• b.Payroll grew faster than the industry average
• c.Actual losses ran below expected for its class✓
• d.Policy has been renewed for many years running

The mod compares an employer's actual loss experience with the losses expected of a business of its size and classification, so better-than-expected results produce a factor below 1.00 and a credit, worse results a debit above it. That is why loss control and return-to-work programs pay off: they cut both claim frequency and claim cost. Payroll growth, employee benefits and length of tenure play no part in the formula.

Workers compensation premium is billed at inception on estimated payroll. At the end of the policy term:

• a.An audit compares estimated payroll with actual✓
• b.The estimate becomes final and cannot be changed
• c.The insurer refunds any premium paid over the mod
• d.The employer must file a new application to renew

Because payroll is only estimated when the policy is written, the insurer audits the employer's records after the term ends and computes earned premium on actual payroll by classification. The difference is billed as additional premium or returned to the employer. Treating the deposit as final is the common misconception; it is only a starting figure, and the end of a term does not by itself require a fresh application.

In a jurisdiction served by a monopolistic state fund, an employer needing workers compensation coverage:

• a.Buys the statutory coverage from that fund✓
• b.Chooses freely among competing private insurers
• c.Is excused from providing compensation benefits
• d.Pays the benefits directly out of its own payroll

A monopolistic fund is the sole source of statutory coverage in its jurisdiction, so private carriers may not write that coverage there and the employer has no choice of insurer. Employers liability is generally not part of what such a fund sells, which is why a stop-gap endorsement is added to another policy to fill the gap. The employer is not excused from the benefit obligation and does not simply pay claims out of payroll.

An employer with a poor loss record cannot find any workers compensation insurer willing to quote it. Coverage is normally obtained through:

• a.A captive formed by the employer's bank
• b.A surplus lines broker in another market
• c.The assigned risk plan or residual market✓
• d.A reinsurance treaty written for the risk

Because compensation coverage is compulsory for covered employers, every competitive jurisdiction maintains a market of last resort that assigns hard-to-place employers to insurers or to a designated servicing carrier. Surplus lines exists for risks admitted carriers decline, but it is not the route for statutory compensation. Reinsurance protects the insurer rather than the employer, and a bank does not form a captive for its borrower.

An injured railroad worker engaged in interstate commerce recovers for on-the-job injuries under:

• a.The Jones Act, on a no-fault benefit schedule
• b.The compensation act of the worker's home area
• c.The Longshore Act, on a no-fault schedule
• d.The Federal Employers Liability Act, proving fault✓

Railroad workers sit outside the compensation systems entirely: the Federal Employers Liability Act gives them a negligence action against the railroad, so the worker must show employer fault and damages are decided as in any tort case rather than by a benefit schedule. The Jones Act plays that same fault-based role for seamen, and the Longshore Act covers maritime work on and around navigable waters.

A longshoreman is injured while unloading a cargo ship at a pier. His benefits are provided by:

• a.The Defense Base Act for waterfront work
• b.The Jones Act, as a member of the crew
• c.The ordinary compensation policy alone
• d.The Longshore and Harbor Workers Act✓

The Longshore and Harbor Workers Compensation Act is a federal no-fault benefit system for maritime employment on navigable waters and the adjoining piers and terminals, covering loading, unloading, shipbuilding and ship repair. The Jones Act is the wrong fit because it reaches masters and crew members of a vessel, and the Defense Base Act applies to contract work performed overseas for the government.

A civilian technician employed by a United States government contractor is injured while working on an overseas military base. Benefits are provided under:

• a.A group health plan only
• b.The Federal Employers Liability Act
• c.The Jones Act for contractors
• d.The Defense Base Act✓

The Defense Base Act extends the Longshore benefit system to civilian employees of United States contractors working overseas, including on military bases and on public works projects. The Jones Act reaches seamen and the Federal Employers Liability Act reaches railroad workers, so neither fits a technician on a base. A group health plan might pay medical bills but owes no indemnity or survivor benefits.

For an injury to be compensable under a workers compensation law, the standard test is that it must:

• a.Result from a sudden accident the worker reports
• b.Occur on premises the employer owns or leases
• c.Arise out of and occur in the course of employment✓
• d.Be caused by equipment the employer supplied

Two elements must both be satisfied: a causal connection between the work and the injury, and a connection of time, place and circumstance showing the worker was doing the job. An injury on the employer's own premises can still fail the test if it was purely personal, and an injury far off premises can pass it if the worker was on the employer's business. Neither a supplied tool nor a sudden event is required.

A machine operator develops a lung condition after years of breathing dust in the plant. Compared with a broken arm from a fall, this claim is:

• a.A permanent total disability by definition
• b.An occupational disease, developing gradually✓
• c.Outside compensation, being a health matter
• d.An accidental injury with a delayed report

An occupational disease arises out of conditions characteristic of the work over time and cannot be traced to one identifiable event, which is precisely what separates it from an accidental injury such as a fall. Compensation systems cover both, so treating a work-caused lung condition as a private health problem is wrong. The classification says nothing about degree; the resulting disability could be partial or total.