Tag: Workers’ Compensation

Psst. Do You Know The Most Common Workplace Accidents and Injuries?

Did you know that maintaining a safe workplace can lower the cost of workers’ compensation insurance? It’s true. Employers with fewer workplace injury claims may enjoy valuable premium credits. Alternatively, employers with more injury claims may suffer higher insurance premiums. The resulting premium difference can be significant, particularly for employers, like those in Florida, who may be facing substantial premium increases.

Employers wanting to take advantage of the correlation between workplace injuries and insurance premiums need to implement safety programs that effectively reduce, if not eliminate, workplace injuries. The first step to developing an effective safety program is to identify the most common workplace accidents and the most common employee injuries.

Travelers recently analyzed more than 1.5 million workers’ compensation claims submitted from 2010 though 2014 to learn more about the most common and costliest workplace accidents and injuries. According to Travelers Injury Impact Report, the top five causes of workplace accidents were:

  • Material handling (32%)
  • Slips, trips and falls (16%)
  • Being struck by or colliding with an object (10%)
  • Tools (7%)
  • Cumulative trauma injury caused by overuse or strain over time (4%)

 

Material handling was actually the most common cause of accidents for all businesses and across all industries analyzed in the report. The most frequent material handling injuries were strains/sprains, cuts/punctures, contusions, inflammation and fractures. These injuries typically occur when employees are lifting, lowering, filling, emptying or carrying items.

The top five workers’ compensation injuries were:

  • Strains and sprains (30%)
  • Cuts or punctures (19%)
  • Contusions (12%)
  • Inflammation (5%)
  • Fractures (5%)

Except for small businesses, strains and sprains topped all lists for the most common type of injury. For small businesses, cuts or punctures were the most common injury—strains and sprains were second.

The average number of days away from work for the top 5 workplace injuries was:

  • Strains and sprains (57 days)
  • Cuts or punctures (24 days)
  • Contusions (27 days)
  • Inflammation (91 days)
  • Fractures (78 days)

It’s interesting, and perhaps fortunate, that the costliest injuries did not turn out to be the most common injuries. According to the report, the injuries with the highest average cost per claim were:

  • Amputation ($102,500)
  • Dislocation ($97,100)
  • Electric shock ($55,200)
  • Crushing ($54,600)
  • Multiple trauma ($42,400)

 

The average cost per claim involving the five most common injuries was:

  • Strains and sprains ($17,000)
  • Cuts or punctures ($8,200)
  • Contusions ($8,000)
  • Inflammation ($24,500)
  • Fractures ($42,400)

Employers have the ability to affect their workers’ compensation insurance premiums , for better or worse. Knowing how and why workplace injuries occur puts employers in a better position to develop and implement their own safety and training programs. When done effectively, employers may have fewer workplace injuries and may end up paying less for workers’ compensation insurance.

Please contact us if you would like more information about controlling workers’ compensation insurance costs.

Additional information is also available in our weekly Risk Management Newsletters.

Florida Supreme Court Ruling May Increase Workers’ Compensation Premiums

A recent decision by the Florida Supreme Court may soon have employers paying substantially more for workers’ compensation insurance. In Castellanos v. Next Door Company, the Court ruled that Florida’s mandatory workers’ compensation attorney fee schedule is unconstitutional. In response to this ruling, the National Council on Compensation Insurance (NCCI) proposed increasing Florida’s workers’ compensation rates by 17.1%.

Under Florida Statute 440.34, attorneys who successfully secure workers’ compensation benefits for injured clients may be awarded attorneys’ fees. However, any attorney fee award, which is based on the amount of workers’ compensation benefits secured, must equal:

  • 20 percent of the first $ 5,000;
  • 15 percent of the next $ 5,000;
  • 10 percent of any remaining benefits that will be provided during the first 10 years after the claim is filed; and
  • 5 percent of any benefits secured after 10 years.

In Castellanos, the Florida Supreme Court considered whether this mandatory fee schedule is constitutional.

Marvin Castellanos suffered an injury on the job. The workers’ compensation insurance company refused to authorize the medical treatment recommended by its own designated doctor and raised twelve affirmative defenses to avoid paying compensation. After a final hearing, the Judge of Compensation Claims (JCC) ruled entirely in Mr. Castellanos’ favor.

Mr. Castellanos’ attorney spent 107 hours working on the case and requested an award of attorneys’ fees calculated at $350 per hour. Despite finding this request to be reasonable and warranted, the JCC was required to follow Florida’s mandatory fee schedule. Based on the actual value of the benefits secured, Mr. Castellanos’ attorney was awarded fees in the amount of $164.54, or $1.53 per hour.

The Court noted that the mandatory fee schedule does not consider the reasonableness of a fee and does not permit the review of grossly inadequate or grossly excessive fees. “Without the ability of the attorney to present, and the JCC to determine, the reasonableness of the fee award and to deviate where necessary, the risk is too great that the fee award will be entirely arbitrary, unjust, and grossly inadequate.” Accordingly, the Court ruled that Section 440.34 is unconstitutional.

As a result, the statute’s immediate predecessor, which was construed to provide for a “reasonable” award of attorney’s fees, was essentially revived. Though the statutory fee schedule remains the starting point for calculating fees, claimants must now be allowed to present evidence to show that its application will result in an unreasonable fee.

Though the Court emphasized that its ruling does not mean that claimants’ attorneys will receive a windfall, insurance companies disagreed. On May 27, 2016, NCCI, which is a licensed rating organization authorized to submit workers’ compensation insurance rate filings on behalf of Florida insurance companies, submitted a proposed rate increase to the Office of Insurance Regulation (OIR).

According to NCCI, the first year impact of Castellanos will be a 15% increase in overall Florida workers compensation system costs. (The total proposed rate increase of 17.1% includes factors that are not related to Castellanos.) NCCI proposes applying the increased rates to new and renewal policies that are effective on or after August 1, 2016. NCCI also proposes applying the increased rates to all policies in effect on August 1, 2016 on a pro-rata basis through the remainder of the term of these policies.

If NCCI’s proposal is approved, Florida would have the highest workers’ compensation rates in the Southeast. The OIR plans to hold a public hearing regarding NCCI’s proposed rate increase in the coming months, so stay tuned.

Even if the OIR approves all or part of NCCI’s proposed rate increase, there are ways to lower workers’ compensation insurance costs, such as promoting employee safety and maintaining a safe work environment.

Please contact us if you would like more information about controlling workers’ compensation insurance costs.

Additional information is also available in our weekly Risk Management Newsletters.

Understanding Excepted Benefits Under the Affordable Care Act

Many employers offer benefits packages that provide employees with more than just health insurance coverage. Though some of these benefits, like pre-paid legal service plans, are clearly not health-related, others may provide employees with some health-related benefits. Does this mean they are subject to the Affordable Care Act’s health insurance market reforms? Not necessarily.

Certain types of benefits, due to their nature, are not subject to a number of health-related laws, including the Affordable Care Act, the Health Insurance Portability and Accountability Act, the Mental Health Parity Act and the Genetic Information Nondiscrimination Act. These are known as excepted benefits.

There are four categories of excepted benefits.

  1.         Benefits Excepted In All Circumstances

The following benefits, or any combination thereof, are considered excepted benefits in all circumstances:

  • Coverage only for accident (including accidental death and dismemberment)
  • Disability income coverage
  • Liability insurance, including general liability and automobile insurance
  • Coverage issued as a supplement to liability insurance
  • Workers’ compensation or similar coverage
  • Automobile medical payment insurance
  • Credit-only insurance (for example, mortgage insurance)
  • Coverage for on-site medical clinics
  1.         Limited Excepted Benefits

A number of benefits may be considered excepted benefits if they are provided under a separate policy, certificate or contract of insurance. They can also qualify as a limited excepted benefit if they are not an integral part of a group health plan, which means that participants may decline coverage or that claims for benefits are administered under a separate contract than claims for any other benefits under the plan.

One or more of the following benefits may qualify as a limited excepted benefit:

  • Limited-scope dental benefits
  • Limited-scope vision benefits
  • Long-term care benefits
  • Health flexible spending arrangements
  • Employee assistance programs (EAPs)
  1.         Noncoordinated Excepted Benefits

Coverage for only a specified disease or illness, such as a cancer-only policy, may qualify as a noncoordinated excepted benefit. Hospital indemnity or other fixed indemnity insurance may also qualify if it pays a fixed dollar amount per day (or per other period) of hospitalization or illness regardless of the amount of expenses incurred.

To qualify as a noncoordinated excepted benefit:

  • Benefits must be provided under a separate policy, certificate or contract of insurance;
  • There is no coordination between the benefits provided and an exclusion of benefits under any group health plan maintained by the same employer; and
  • Benefits are paid regardless of whether benefits are provided under any group health plan maintained by the same employer.
  1.         Supplemental Excepted Benefits

The following benefits may qualify as supplemental excepted benefits if they are provided under a separate policy, certificate or contract of insurance:

  • Medicare supplemental health insurance (Medigap or MedSupp insurance);
  • Coverage supplemental to the managed health care program established by the Department of Defense (TRICARE); and
  • Similar supplemental coverage specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles, but which does not include coverage that becomes secondary or supplemental only under a coordination-of-benefits provision.

Excepted benefits must satisfy a number of specific requirements set forth in the federal regulations. Employers should consult a knowledgeable and licensed professional before taking action or making changes to their benefits packages.

If you would like more information about excepted benefits or would like to see how Setnor Byer Insurance & Risk can help with your employee benefits package, contact us.

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Office Holiday Parties: Revel without Regret

Many employers consider a company-wide holiday celebration an excellent opportunity for employees to mingle socially and get to know one another better. It’s also a chance for senior management to interact with employees they rarely see throughout the year. Though holiday parties can create a positive work environment, increase employee morale and promote teamwork, they can also expose employers to a number of potentially significant risks.

Perhaps the most significant risks involve alcohol. What happens if an employee becomes intoxicated and causes damage to something or someone? Though liability is determined on a case-by-case basis, employers may face a greater chance of being held responsible if:

  • Attendance is, or is perceived to be, mandatory (e.g., everybody knows that being seen by the Vice President will enhance one’s chances of a promotion);
  • The employer pays for or provides the alcohol; or
  • The employer conducts business during the holiday party.

Employers can take steps to reduce their potential liability, such as:

  • Collect car keys from all who drink. Toward the close of the party, assign designated drivers or call taxis for anyone who is too impaired to drive. If the party is in a hotel, reserve a block of rooms for the inebriated to spend the night.
  • Appoint someone in a position of authority to monitor alcohol consumption; including making certain that no alcohol is served to minors.
  • Serve a limited amount of alcohol, controlled through “drink coupons.” (i.e., two drinks per person). Close the bar once dinner begins.
  • Send a memo to all employees prior to the party stating clearly that a) employees who arrive inebriated will not be allowed in; b) employees cannot bring their own alcohol; c) excessive drinking will not be tolerated; and d) intoxication and inappropriate behavior at the party will be grounds for discipline.
  • Do not permit supervisors or managers to buy alcoholic beverages for employees.
  • Hold the party at an off-site location and use professional bartenders to serve and monitor alcohol consumption.

There are other risks employers should consider when planning and holding the annual office holiday party, such as:

Discrimination and Harassment: Lines are often blurred during an office party, so they are often crossed. Conduct that is inappropriate at work may be considered appropriate at a party, such as engaging in intimate conversations or acts, giving a racy gift or telling an off-color joke. Employers may be held liable for unlawful harassment or discrimination that takes place during a holiday party, even if it’s off-premises and off-the-clock. Consider redistribution of the sexual harassment policy, and remind employees that a holiday party is no excuse for inappropriate behavior, which will not be tolerated.

Premises Liability: Employees are often allowed to bring spouses and significant others to the office holiday party. Every ‘plus one’ accompanied by an employee is a potential slip-and-fall victim. Employers must make sure the workplace is safe before the party and keep it safe during the party.

Workers’ Compensation: Employees are typically covered by workers’ compensation if they are injured in the course and scope of their employment. Though getting hurt at a holiday party wouldn’t seem to be work-related, an employee may be covered by workers’ compensation if attendance at the party is explicitly or implicitly required (or ‘encouraged’). Tell employees the holiday party is purely a voluntary social event, and mean it.

Employers should review their insurance policies before the party to make sure they are covered in the event something happens during the holiday party. General liability, employment practices liability and workers’ compensation insurance may cover some of the risks created by the office holiday party. However, other risks may require additional insurance coverage, such as a policy that covers one-time events, including alcohol-related liability, which may be available for a small additional premium.

If you would like more information about how Setnor Byer Insurance & Risk can help protect your business during the holidays and year round, please contact us.

How Can Safety Reduce Workers’ Compensation Insurance Premiums?

Workers’ compensation insurance provides indemnity and medical benefits to employees injured on the job. Many states, including Florida, set the premiums for workers’ compensation insurance, so shopping around isn’t the way to save money. However, employers can reduce their workers’ compensation insurance premiums by maintaining a safe workplace

Insurance companies prefer safe workplaces because there are presumably fewer claims to pay. They encourage employers to maintain a safe workplace by using experience modification ratings to adjust premiums. Employers with fewer claims are rewarded with premium credits, and employers with more claims may face increased premiums.

The experience modification rating, or experience mod, is designed to tailor the final premium to an employer’s actual claims experience. An employer’s actual workers’ compensation claims experience, typically over a three year period, is compared to other employers operating in the same type of business with a similar number of employees.

If an employer’s claims experience is consistent with the industry average, the experience mod is 1.0, which when multiplied by the base premium, will not increase or decrease the premium. If the claims experience is 25% better than the industry average, the experience mod will be .75, which when multiplied by the base premium, will decrease the premium by 25%. Alternatively, if the claims experience is 25% worse, the experience mod will be 1.25, which will increase the premium by 25%.

The experience mod gives more weight to accident frequency than to accident severity. In other words, an employer with one loss totaling $100,000 will have a better experience mod than an employer with 10 losses totaling $100,000. Since any single injury could have astronomical costs, an employer with a higher frequency of small claims is considered a greater risk than an employer with a single, expensive claim.

Medical-only claims do impact the experience modification as much as indemnity claims, so employers are not necessarily penalized when they occur. However, the existence of open or unresolved claims can negatively impact the experience mod, so employers benefit from getting claims resolved and closed.

Insurers may offer dividend payments to employers with few or no claims. Dividends, which are generally reserved for the most attractive risks, are usually based on a sliding scale wherein the amount of the dividend decreases as the number of claims increases. Rather than focus on the most generous dividend percentage, employers should compare dividend percentages that comport with their specific claims history.

Employers can reduce their workers’ compensation insurance premiums by taking advantage of the experience modification rating system. Though it requires a commitment to workplace safety and loss control, the savings could be significant. Given the complexity, employers should work with an insurance agent who knows about the experience modification rating system and available dividend plans, and who can ensure claims are treated appropriately and resolved quickly.

If you would like more information about workers’ compensation insurance or how Setnor Byer Insurance & Risk can help control your workers’ compensation insurance costs, please contact us.

Understanding Business Insurance: What is BOP?

Many businesses take a piecemeal approach to buying insurance. One policy for property insurance, another for liability insurance, and so on. Unfortunately, this approach can be difficult and time consuming, particularly for small- and medium-sized businesses. For these businesses, a Business Owners Policy, a BOP, may be an attractive alternative.

A BOP is a pre-packaged bundle of coverages that insurance companies offer to eligible small- and medium-sized businesses. BOPs are designed to provide a number of essential insurance coverages in a convenient and cost effective manner. BOPs typically provide:

  • Property insurance to cover damage to buildings and contents;
  • Business income (business interruption) insurance to cover the loss of income resulting from a covered loss that Disrupts business operations; and
  • Liability insurance to protect against liability claims for bodily injury and property damage occurring on a business’s premises or arising out of its operations.

Depending on the insurance company, additional coverages may be included in a BOP, or added for an additional premium, such as:

  • Cyber Liability
  • Employment Practices Liability
  • Valuable Papers and Records
  • Personal and Advertising Liability
  • Liquor Liability
  • Equipment Breakdown
  • Sale and Disposal Liability coverage for self storage facilities

Though BOP eligibility requirements can vary significantly among insurance companies, BOPs are typically limited to small- and medium-sized businesses, which are generally those with fewer than 100 employees and annual revenues of less than $5 million. BOPs may also not be available to businesses operating in specific industries or those with highly specialized or high-risk operations.

Alternatively, BOPs may not be the solution for some businesses, even those that are eligible for them. For example, some businesses may require higher limits or broader coverage forms that are not available in a BOP. There are also a number of coverages that BOPs do not provide, such as workers compensation, commercial automobile and professional liability insurance. Even with a BOP, additional insurance policies may still be necessary.

Since BOPs are customized insurance products, it is important to note that coverage options and features (limits, exclusions, etc.) can vary significantly among insurers. Unfortunately, the lack of uniform eligibility requirements, coverage options and policy features makes it difficult to understand and compare the various BOP options that may be available. An experienced insurance agent should be consulted throughout the process.

If you would like to learn more about BOPs or the various options that may be available to insure your business, contact us.

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Insurance for Tech Companies

Since most businesses rely on technology, providing technology services has become big business. Technology companies provide goods, services and expertise that can increase efficiency, productivity and profitability. These businesses may involve:

  • System / network development and administration
  • Application and website programming and design
  • Hardware installation and repair
  • Website hosting, maintenance and optimization
  • Information Technology consulting, staffing and training
  • Project management
  • Consulting

Technology companies face the same risks as other businesses, so traditional insurance coverages are required, such as general liability, property, automobile and workers compensation insurance. However, additional insurance coverage may also be necessary to address the unique risks facing technology companies.

For example, many technology companies do not believe they need Errors & Omissions (Professional Liability) insurance. The reality is that technology companies, just like doctors and lawyers, can be held liable for errors and omissions committed in the performance of their professional services.

Unfortunately, a traditional E&O policy may not protect against many of the risks unique to technology companies. This is why technology-specific insurance is needed to cover technology-specific risks. To ensure adequate insurance coverage, technology companies should look for an E&O policy that, at a minimum:

  • Broadly defines “Computer Technology Services”
  • Provides coverage for failure to prevent unauthorized access to or use of any electronic system or program of a third party
  • Provides coverage for unauthorized, corrupting or harmful pieces of code, including, computer viruses, worms and Trojan Horses
  • Covers personal injury claims alleging wrongful entry, wrongful eviction, wrongful detention, false arrest, false imprisonment, libel, slander or defamation, advertising injury or violation of any right of privacy
  • Provides sufficient coverage limits

The right E&O policy lets technology companies focus on their business knowing that they are protected in the event of a claim. And, since clients are increasingly requiring proof of E&O insurance from their technology vendors, an E&O policy may also create new opportunities.

Given the complexity of the risks facing technology companies, evaluating insurance needs and options is not always easy. For example, in addition to E&O insurance, technology companies may also need coverage for cyber liability claims, including data security breaches, which are becoming more common.

An experienced insurance agent can guide you through the process of protecting your technology company. If you would like to learn more about insuring a technology company, contact us.

If you would like to learn more about preventing data security breaches, take our online course Information Risk Management: Strategies for Preventing and Mitigating Information Security Breaches.

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Implementing a Drug-Free Workplace Program

Though many believe substance abuse is not a problem in their workplace, statistics suggest otherwise. According to the National Institute on Drug Abuse (NIDA), nearly 75% of substance and alcohol abusers are employed. In addition to costing employers billions of dollars per year, substance abusers are more likely to:

  • Change jobs frequently
  • Be late to or absent from work
  • Be less productive
  • Be involved in a workplace accident
  • File a workers’ compensation claim

To help combat the problem, many employers have implemented a Drug-Free Workplace program. These programs incorporate various elements designed to prevent substance abusers from entering the workplace, identify and assist those already in the workplace, and eliminate continuing abusers from the workplace.

According to NIDA, employers with Drug-Free Workplace programs:

  • Report improvements in morale and productivity, and decreases in absenteeism, accidents, downtime, turnover, and theft
  • Report better health status among employees and family members and decreased use of medical benefits by these same groups

Employers can also reduce their workers’ compensation insurance premiums by implementing a Drug-Free Workplace program. For example, a 5% premium credit is available in Alabama, Florida, South Carolina and Virginia. Employers can save up to 7% in Ohio, and 7.5% in Georgia. Additionally, employers with fewer workplace accidents can also see reduced premiums due to an improved experience modification rating.

States have their own requirements for determining whether a Drug-Free Workplace program qualifies for a workers’ compensation premium credit. Since they can be very specific and technical, it is important to consult with a licensed professional prior to implementing a Drug-Free Workplace program.

If you have any questions about implementing a Drug-Free Workplace program or you would like to learn more about reducing your insurance premiums, please contact us.

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Calculating Workers Compensation Insurance Premiums

Workers’ Compensation (WC) provides medical, disability, rehabilitation or death benefits to employees who have suffered a job-related injury or illness. Employers are generally required by their state’s law to provide WC coverage to employees. Since most employers purchase insurance to satisfy this statutory obligation, it is important to understand how WC insurance premiums are calculated.

The formula for calculating the starting WC premium is (Payroll / 100) x (Premium Rate). To understand this formula we need to discuss three elements that play a big part in calculating the premium.

Payroll

The premium for WC insurance is based on an employer’s payroll, which is generally defined to include the total remuneration paid by an employer. Payroll typically includes wages, salaries, commissions, bonuses and paid time off, and typically excludes tips, severance, active military duty pay and employee discounts. Employers should check state-specific requirements, including the treatment of executive officers, when calculating payroll for WC insurance purposes.

Classification (Class) Code

Insurance companies use class codes to assign premium rates to specific workplaces based on the risks associated with a particular kind of work. Most states use the classification codes developed by the National Council on Compensation Insurance (NCCI). There are approximately 550 different class codes and they can be very specific. For example, the correct code for Janitorial Services by Contractors may depend on whether the services include window cleaning above ground level.

Though a single employer can be assigned more than one class code, it is important to note that classification codes are designed to categorize employers with common exposures rather than the specific occupations of each employee within an organization. Since class codes are specific and appear to be somewhat conflicting, choosing the appropriate class code is not always easy and mistakes are common.

Premium Rate

Each class code is assigned a premium rate that corresponds to the risks associated with that particular kind of work. These rates, which are evaluated regularly, are applied to every $100 of payroll. Higher risk jobs are given higher premium rates. NCCI provides premium rates for each of its class codes, and many states rely on them when setting their own rates.

Now, let’s assume an employer has a payroll of $187,500 and that the premium rate for its classification code is $1.07. Divide the payroll by 100 [187,500 / 100 = 1,875], and multiply the quotient by the premium rate [1,875 x 1.07] to get a premium of $2,006.25. Note that if the applicable premium rate is $6.05, then the premium would be $11,343.75.

Remember that this is only the starting premium. Additional pricing factors may be applied to the starting premium to arrive at the final premium, such as:

  • Minimum premium requirements
  • Experience modification based on prior loss history
  • Discounts based on the size of the premium
  • Credits for qualifying safety and drug-free programs
  • Dividend plans tied to loss experience
  • Audits adjusting premiums to reflect actual (rather than estimated) payroll

Since the starting premium can be significantly affected by these additional pricing factors, a reputable insurance agent with substantial experience in evaluating and placing WC insurance should be consulted. For those employers with a statutory obligation to provide WC coverage, mistakes can be very costly.

If you would like more information about obtaining workers’ compensation insurance for your organization, please contact us.

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The Danger Within: Domestic Liability Exposure

Many homeowners employ an employee, whose duties are related to the maintenance or use of the owner’s home, including household or domestic services. Unfortunately, many of these same homeowners do not fully understand the risks associated with employing a domestic employee, or whether such risks are covered under their homeowners’ insurance policy.

What happens if a domestic employee suffers a serious injury while working? Will the homeowners’ insurance policy cover the claim? Will the homeowners be covered if the domestic employee sues for damages? Since the cost of a severe injury could be significant, it is better to know the answers to these questions sooner rather than later. This is done by reviewing the homeowners’ policy to determine whether domestic employees are covered, and, if so, to what extent.

While a particular policy may exclude coverage for domestic employees, there are standard form insurance policies that do provide coverage, though it may be limited by various qualifications and conditions found throughout the policy. Accordingly, when determining the scope of coverage for domestic employees, who are also known as residence employees, it is necessary to read the policy’s “fine print.”

A standard form homeowners’ insurance policy may provide coverage for personal property owned by a domestic employee, provided such property is located in the residence of the insured. If a domestic employee suffers bodily injury in an accident, a policy may cover the domestic employee’s medical expenses in specific instances, provided the bodily injury did not occur away from the residence while the employee was not working. However, since this coverage often comes with relatively low limits, it will only protect a homeowner in instances involving very minor injuries.

A standard homeowners’ policy may also cover a third-party’s medical expenses if the person is injured away from the insured’s home, and the injury is caused by a domestic employee in the course of his or her employment with the homeowner, though the extent to which any injured person is covered may depend on the availability of other insurance. Additionally, various exclusions, such as the motor vehicle liability, watercraft liability, and aircraft liability exclusions, may not apply in some cases involving a domestic employee.

Although the foregoing coverages may prove valuable, the biggest concern is whether a policy would protect a homeowner from personal liability in the event a domestic employee is injured while working. In these instances, the homeowner’s potential liability could be financially devastating.

An insurance company will defend a lawsuit and pay damages up to the coverage limit for which the homeowner is legally liable, unless the claim is excluded under the policy. Thus, the relevant question is whether a claim made by an injured domestic employee is excluded from coverage. The answer typically turns on whether the domestic employee is eligible to receive workers’ compensation benefits.

A standard form homeowners’ insurance policy typically excludes coverage for bodily injury to any person who is eligible to receive any benefits voluntarily provided or required to be provided by the homeowner under any workers’ compensation law. To determine whether a claim filed by an injured domestic employee would be covered by the policy, one or two questions must be answered.

The first question is whether the homeowner is required by law to provide workers’ compensation benefits to the domestic employee. Since workers’ compensation is largely a matter of state law, the answer depends on location.

In New York, a domestic employee working 40 or more hours per week for an employer must be covered by workers’ compensation insurance, as do “live-in” domestic employees regardless of any set hours. Accordingly, any claim brought by an injured domestic employee who is eligible for workers’ compensation insurance under New York law will be excluded under the standard homeowners’ policy, even if the homeowner failed to obtain the requisite workers’ compensation insurance.

In Florida, domestic employees in private homes are generally not entitled to workers’ compensation benefits. Since a Florida homeowner is not typically required to provider workers’ compensation benefits, determining whether a domestic employee’s claim will be excluded leads to a second question: Does the homeowner provide workers’ compensation benefits voluntarily?

Under Florida law, an employer may voluntarily accept to be bound by the provisions of the workers’ compensation laws even though an employee, such as a domestic employee, is exempt from such laws. Why? To invoke workers’ compensation immunity as a defense to being sued by an employee who was injured while working.

Because the security of immunity may outweigh the cost of providing benefits, an employer may provide workers’ compensation benefits despite no legal obligation to do so. If this is the case, a claim brought by a domestic employee will not be covered by the standard homeowners’ policy because the employee is eligible to receive workers’ compensation benefits, albeit voluntarily.

So, a claim will not be covered under a standard homeowners’ policy if the domestic employee is eligible to receive workers’ compensation benefits, regardless of whether such eligibility is required by law or provided voluntarily. As written, the standard exclusion would likely apply even if the employee does not receive any workers’ compensation benefits because eligibility, rather than receipt, is the key.

Before a risk can be managed, it must be understood. Without knowing the probability and degree of potential liability exposures, as well as options for controlling the frequency and severity of such exposures, it is impossible to make an informed decision. For those with domestic employees, the first step is to review their homeowners’ insurance policy to find any gaps in coverage. The next step will depend on the extent to which the homeowner is comfortable assuming the financial risk of any such gaps.

Since reviewing a policy and determining the applicability of various laws can be complicated, it is helpful to consult an experienced and reputable insurance agent. If you would like to learn more about protecting against the risks created by domestic employees, or if you would like to discuss your insurance options, please contact us.