ABOUT WORKERS COMPENSATION COVERAGE
Worker’s Compensation is insurance for employees injured during the course of their work. It provides wages and medical care in exchange for mandatory relinquishment of the employee’s right to sue his/her employer for any tort of negligence. This tradeoff is known as “the compensation bargain”.
Plans vary among jurisdictions, and in some cases, provisions can include weekly payments in place of wages (functioning like disability insurance), compensation for past and future economic loss, and reimbursement for medical care expenses (functioning like health insurance). In addition, benefits may be payable to dependents of workers killed during employment which functions like a life insurance policy.
Worker’s Compensation is designed to ensure that employees who are injured or disabled during work are not required to cover medical bills related to their on-the-job accident. The original intent was to eliminate the need for employees to litigate. The Workers Comp system means that workers give up the right to sue for pain and suffering awards. Employers are protected by having limited amounts that an employee can recover. The coworkers of an injured worker are protected – because the liability of co-workers has been eliminated altogether. The actual amounts and details of workers compensation claims are established on a state-by-state basis. Federal statutes in the United States are limited to federal employees or those workers employed in some significant aspect of interstate commerce.
HOW WORKERS COMPENSATION GOT ITS START
At the start, finding common ground between laborers and employers took some time and effort. Laws passed simply allowed injured employees to sue their employers and then make a case proving a negligent act or omission. Thus, an injured workers’ only potential for compensation was to sue their employer for negligence (via a civil or ‘tort’ action). However, most employers had better resources and used several effective defenses (described below), often rendering the lawsuit a wasted effort for the injured worker. In other words, employers would win, and the worker who sued them could be fired.
Back then, key defenses included Assumption of Risk, which stated the employee assumed the risk of dangerous or potentially dangerous activity when agreeing to work for the industry, therefore lifting any duty of care from the employer. Contributory Negligence was used to make the case that if the injured worker was even partially responsible for causing or aggravating his/her injury, he/she was barred from any restoration from the employer. And, the Fellow Servant Rule stated if the employee’s injury was caused by a fellow employee and not by the employer, then the employer was not at fault and should not be charged with negligence.
The constant litigation took up an enormous amount of time and money for both employers and employees. It also placed a heavy burden on the judicial system.
Wisconsin became the first state in the U.S. to pass a workers’ compensation law in 1911. Judges in that state were awarding cases to the employees, and so employers became worried. They became open to some type of action that would rectify the situation, and thus the new law was passed. By 1949, all states had enacted some form of what was known as “workman’s compensation”. It is now commonly referred to as “Worker’s Compensation”.