Workers Compensation is a state mandated, “no-fault” form of insurance that provides compensation for medical care, part of lost wages, and permanent disability for employees who are experiencing occupational diseases or are injured in the course of employment. This is in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence. While plans differ between jurisdictions, provisions can be made for weekly payments in place of wages.
What is Workers Compensation?
General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in worker compensation plans. Fault doesn’t matter; employers are liable even if the employee may have contributed to the injury or illness. Not every employer needs workers’ comp. In some states, small companies with fewer than three to five employees aren’t required to obtain it. Many states offer the employer the option to self-insure, or to cover the costs flowing from on-the-job injuries themselves.
Workers comp is administered on a state-by-state basis with a state governing board overseeing public/private combinations of workers compensation systems. Texas is the only state that does not require it. The specifics vary from state to state.
The federal government has a workers’ compensation program, subject to its own requirements and statutory parameters for federal employees. In the vast majority of states, workers’ compensation is solely provided by private insurance companies. 12 states operate a state fund and a few have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs or insurers of last resort, and they can only write workers’ comp policies.
In contrast, private insurers can turn away the worst risks and can write comprehensive insurance packages covering general liability, natural disasters, and so on.
Workers Comp can cover all these areas:
- Injuries or loss of limbs
- Diseases like emphysema or carpal tunnel syndrome
- Injury inflicted at work
- Medical treatment
- Rehabilitation needed so workers can return to work
- Lost wages
- Liability insurance for the company for lawsuits filed by injured employees