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Workers Compensation Insurance


             Matt Pearson
        Legal Presentation
               MGMT 610
           March 10, 2003
• Review of the Components of the
  Workers’ Compensation Process
• Common Questions
• Case Example
• How does this apply to us?
                 The W.C. Process
                                   Compensation coverage
   Complex and a                  Insurance
    Constantly Changing            Medical Treatment Payments
    Process                        Disability
                                   Death benefits
                                   The injury
   An Individual need’s a         Penalties
    good understanding of the      Liens
    following to be an expert      Tort laws
    on the subject                 Damage suits- subrogation
                                   Appeals
                                   Vocational rehabilitation
     Q. Do I need to have workers'
      compensation insurance?

• A. California law requires employers to
  have workers' compensation insurance.
  Even out-of-state employers may need
  workers' compensation coverage if an
  employee is regularly employed in
  California or a contract of employment is
  entered into here.
           Q. Where do I get workers'
           compensation insurance?
• A. You can get workers' compensation insurance coverage from any
  of the more than 300 private licensed insurers authorized to sell such
  policies in California. While you can purchase the policy directly from
  an insurer, most policies are sold through an insurance agent or

• The largest workers' compensation carrier is State Compensation
  Insurance Fund (State Fund). If you can't find an insurer willing to
  cover your business, State Fund is required to provide you with

• If you belong to a trade association you might want to check with them
  first - some trade groups negotiate special rates for their members.
  Your local chamber of commerce may also be a source of good
     Q. What about self insurance?
• A. Some employers, mainly large businesses, self
  insure for workers' compensation. Self insurance
  requires state approval, a net worth of at least $5
  million, net income of $500,000 per year and
  posting a security deposit.
• The self insured employer has the option of
  administering their own workers' compensation
  claims or contracting with a third party
  administrator (TPA) to provide these services.
• Office of Self Insurance Plans
   Q. How much does workers'
  compensation insurance cost?
• A. Workers' compensation insurance
  premium rates were deregulated several
  years ago. They may now vary from carrier to
  carrier. Shop around for a carrier that best
  meets your needs. Cost is one consideration,
  but there are other factors you should look at:
  the services they provide, how convenient will
  it be to work with them how familiar they are
  with your industry, etc. If you have a broker or
  agent, check with that person.
Q. What determines the employer’s
        rate for premium?

• A. A number of factors that determine the
  annual premium that your insurance carrier
  will charge. These include: your industry
  classification; your company's past history of
  work related injuries (known as your
  experience modification), your payroll; any
  special underwriting adjustments, such as
  use of a certified Health Care Organization;
  and any special group or dividend programs
  that you may be eligible for.
     Q. What happens if I’m caught
   uninsured between carriers and an
         employee is injured?
• A. An employer's failure to have workers' compensation coverage is a
  criminal offense. Section 3700.5 of the California Labor Code specifies
  that it is a misdemeanor punishable by either a fine of up to $10,000 or
  imprisonment in the county jail for up to one year, or both. Additionally,
  the state issues penalties of up to $100,000 against illegally uninsured
• If your insurance coverage lapsed and an employee was injured on
  the job, you are responsible for ensuring that all claims related bills are
  paid. Contact the information and assistance officer at the local DWC
  district office for further information. You may also contact the
  Uninsured Employers' Fund.
          Q. What are my posting
• A. Employers must post a notice of compensation
  carrier poster in a conspicuous place at the work
  site. This poster provides employees information
  on the company's workers' compensation
  coverage and where to get medical care for work
  injuries. Specific requirements are contained in
  sections 3550-3553 of the California Labor Code.
  Failure to post this notice is a misdemeanor that
  can result in a civil penalty of up to $7,000 per
  violation. Contact your insurer to get the posting
  notice and the required information that must be
  included on it.
 Q. Can I be fined for not carrying
workers' compensation insurance?
A. Yes. If the Division of Labor Standards Enforcement (State
   Labor Commissioner) determines that an employer has failed to
   secure workers' compensation coverage, a stop order will be
   issued and served (Labor Code Section 3710.1). This order
   prohibits the use of employee labor until the coverage is
   obtained, and failure to observe it is a misdemeanor punishable
   by imprisonment in the county jail for up to 60 days or by a fine
   of up to $10,000, or both. (Labor Code Section 3710.2). The
   Division of Labor Standards Enforcement will also assess a
   penalty of $1,000 per employee employed at the time the stop
   order is issued and served. (Labor Code section 3722(a)).
 Q. Can I be fined for not carrying
workers' compensation insurance?
• In addition, if an injured worker files a workers'
  compensation claim that goes before the WCAB, and
  the workers' compensation judge finds that the
  employer had not secured insurance as required by
  law, then, when the adjudication becomes final, the
  uninsured employer may be assessed a penalty of
  $10,000 per employee employed at the time of injury
  if the worker's case was found to be compensable, or
  $2,000 per employee employed at the time of injury if
  the worker's case was noncompensable, up to a
  maximum of $100,000 [Labor Code section 3722(b)].
   Q. Can I be fined for not carrying
  workers' compensation insurance?
• Finally,failure to secure workers' compensation insurance
  when you knew, or reasonably should have known, that it
  is required, is a misdemeanor "punishable by
  imprisonment in the county jail for up to one year, or by a
  fine of up to ten thousand dollars ($10,000) or by both that
  imprisonment and fine." (Labor Code Section 3700.5)
 Q. Can my employees contribute for
 workers' compensation insurance?

A. No. Workers' compensation insurance is
 part of the cost of doing business. An
 employer cannot ask employees to help pay
 for the insurance premium.
       Employer's Guide to Workers'
        Compensation in California
• DWC has published an easy to read Employer's
  Guide to Workers' Compensation in California.
• A link to download a copy in Adobe Acrobat (.pdf)
  format can be found here
              Case Example:

• Jeffrey Ferguson was employed as a
  licensed vocational nurse at Tuolumne
  County Hospital from August of 1994
  through April of 1995.
• Submitted four workers’ compensation
  claims for injuries to his wrists, back and
  right heel.
             Case Example:

• In June of 1998, Ferguson attended the 49th
  Tuolumne Lumber Jubilee and competed in
  a tug-of-war contest.
• The 43 minute contest was captured on
  videotape and revealed that Ferguson was
  engaged in physical activities that were
  contrary to his subjective claims.
            Case Example:

• Tuolumne County incurred losses of over
  $75,000 due to his fraudulent claims.
• Ferguson could face up to five years in
  state prison and/or pay a fine up to
          Application to us?
• EVERYONE need WC insurance
• Make sure you are in compliance with the
  insurance regulations
• If in doubt, consult with a labor attorney
• Always watch out for fraudulent claims
• Stay current with the law
Questions /

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