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Understanding the Basics of Workers’ Compensation Insurance

In the United States, employers are required to take reasonable measures to ensure that their workplaces are safe. Despite an employer’s best efforts, accidents will inevitably occur. This is especially true for the construction industry. 

In fact, some people might argue that construction sites are inherently dangerous. It is because of this “inherent danger” that workers’ compensation requirements were enacted in many states.

Workers’ Compensation Overview

A workers’ compensation policy is a piece of insurance that covers injuries that occur in the workplace or on the jobsite. The purpose or workers’ compensation law is to reduce lawsuits against employers for work-related injuries and deaths. Workers’ compensation requirements vary from state to state and throughout different industries. Workers’ compensation insurance is one of the only state-mandated insurance requirements for businesses. In fact, the construction industry, through state licensing boards, has made workers’ compensation a prerequisite for obtaining and maintaining contractor licenses.

Course and Scope of Employment

In general, workers’ compensation insurance covers injuries to employees that occur in the workplace, on the jobsite or anywhere else so long as the injury is sustained in the “course and scope” of employment. The “course and scope” analysis is an important one to understand.

Assume that a contractor is asked to drive from the worksite to a warehouse to pick up parts or pieces and is injured in a motor vehicle accident while on route. His injuries should be covered under the workers’ compensation policy because the injuries occurred while he was in the course and scope of his employment.

However, assume that after picking up the parts from the warehouse the employee stopped at the bank and then drove to the dry cleaners to pick up some shirts and then was injured in a collision while heading out of the cleaner’s parking lot. Under this scenario, workers’ compensation likely would not cover the injuries because the employee had deviated from his course and scope of work.

Deviation from course and scope is a commonly litigated issue. This is because deviation is a fact-specific issue. Many courts have held that minor deviations from the course and scope or work are acceptable. In the example above, had the employee merely stopped at the bank on his way back to the jobsite, a court might have held that coverage should be afforded because the deviation was “de minimis.”

What is the Workers’ Compensation Bar?

In most states, an employer is barred from bringing a lawsuit for injuries or death against his employer. This is because most state statutes make workers’ compensation the “exclusive remedy” for injured workers. While the bar covers the vast majority of on-the-job injuries, there are a few exclusions that allow an employee or the family of a deceased employee to sue the employer directly.

For example, the South Carolina courts have held, “The Workers’ Compensation Act is the exclusive remedy against an employer for an employee’s work-related accident or injury.” Edens v. Bellini, 359 S.C. 433, 441, 597 S.E.2d 863, 867 (Ct. App. 2004). “The exclusivity provision of the act precludes an employee from maintaining a tort action against an employer where the employee sustains a work-related injury.” Id. at 441-42, 597 S.E.2d 867.

While each state has it own exclusions, most involve situations where the employer has committed an intentional or deliberate harmful act or is grossly negligent. Other exclusions include employer violations of federal laws with respect to migrant workers; injuries caused by the negligence of a third-party; and where the injury is specifically excluded from coverage under the state’s workers’ compensation laws.

An example of an individual state exclusion can be seen in South Carolina, where the statute states that the “exclusive remedy” provision shall exclude all other rights and remedies that the employee or his family may have, “Provided, however, this limitation of actions shall not apply to injuries resulting from acts of a subcontractor of the employer or his employees or bar actions by an employee of one subcontractor against another subcontractor or his employees when both subcontractors are hired by a common employer.” S.C. Code Ann. § 42-1-540 (1985).

Employers’ Obligations

Aside from having proper coverage, what else must an employer do to comply with workers’ compensation laws? One of the most important requirements is to quickly report all injuries or claims to the insurance carrier and to the state’s workers’ compensation board. In fact, many states have reporting deadlines. For example, in Colorado an employer must report an injury to its carrier within 10 days, regardless of how small the injury is. OSHA also has implemented strict reporting deadlines.

Separate from state requirements or OSHA, delays in reporting injuries can have other negative repercussions for the employer. For example, late reporting can impede a carrier’s ability to investigate and identify fraudulent claims, impeded the ability to deny claims and eliminate the possibility of directing initial treatment.

Conclusion

Workers’ compensation laws can help employers effectively deal with workplace injuries. It is important for contractors to make sure that their coverage is sufficient and current. It is equally important for contractors to understand the specific rules and regulations in their sates and to comply with all reporting deadlines. The failure to deal with workers’ compensation insurance and claims properly can have a disastrous effect on the construction company’s finances and ability to operate.

One Reply
  1. Thanks for sharing this. While it is important to be compliant and have coverage, following through on any claims in a timely manner can make a big difference in how things play out. Working with the employee and the company handling the case can make the entire process much smoother and easier to work through.

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