A Quick Guide to Workers’ Compensation (and What Is and Isn’t Covered)

Posted by: Karen Booher on March 4th, 2024

Many employers don’t know the ins and outs of workers’ compensation. What’s covered? What’s not covered? The following information, provided by Pinnacol Assurance, helps explain some of the basics.

What is Workers’ Compensation?

Workers’ compensation (often referred to as workers’ comp or workman’s comp) is a type of business insurance and a Colorado state-mandated employer-held insurance program. It protects both your workers and business by providing benefits when employees suffer a job-related injury or illness.

All businesses in Colorado that are not sole proprietorships with at least one employee must hold a workers’ compensation policy. While nearly all employees must be covered, there are some exceptions, including but not limited to:

• Independent contractors
• Independent real estate sales personnel paid solely by commission
• Employers and employees covered by federal law
• Employees of religious and charitable organizations who earn less than $750 a year
• Casual employees who earn less than $2,000 a year
• Corporate officers and members of LLC’s who own at least 10% of interest may decide whether they wish to be covered
• Volunteer ski lift operators, railroad workers, inmates of correctional facilities

What Does Workers’ Compensation Cover?

There are 2 different types of coverage: Part A (state-mandated) and Part B (employer’s liability coverage)

Part A

Part A Refers to an insurance policy that protects employees under state laws. Coverage includes the following benefits when an employee is injured (or killed) while on the job in Colorado:

• • • Employee medical costs and care
    • Lost wages
    • Disability benefits
    • Ongoing care
    • Work-related injury legal fees (employer only)

Under the course and scope rule, employees injured OUTSIDE OF THE WORKPLACE can also be eligible for coverage. These exceptions include:

• • • The employee’s contract includes transportation to and from work
    • Walking to and from the place of employment while in a company parking lot during a designated time (right before or after the work shift starts)
    • Company-sponsored events, such as sports functions or group meetings, where attendance is mandatory
    • Work from home
    • Traveling on company-sponsored business

All compensation and benefits related to your state’s workers’ compensation laws are paid by your insurance company without regard to fault.

Part B

Premiums are based on your company’s payroll and the types of duties employees perform. Part B covers:

• • • Medical care
    • Lost wages
    • Rehabilitation costs
    • Damages up to certain limits

The type of injury determines how much an injured party is paid. The most common injury types and limits are bodily injury by:

• • • Accident – $100,000 per accident
    • Disease – $500,000 policy limit
    • Disease – $100,000 for each employee

Unlike Part A, Part B covers you in certain circumstances against liability to third parties who sustain damages as a result of an employee’s injury that is caused by your negligence.

What Isn’t Covered by Workers’ Comp Insurance?

Not everything is covered by WC insurance. Some items not covered include:

• Volunteers (except certain government volunteers such as police and fire)
• OSHA fines
• Wages for replacement workers
• Injuries claimed after termination or layoff
• Independent contractor injuries
• Injuries caused on purpose by the employee
• Injuries resulting from a social or athletic event that is not mandatory
• Injuries resulting from horseplay
• Injuries resulting from activities outside of work hours or the scope of business (i.e., happy hours and team events)

Injuries are covered, but may result in reduced compensation, when:

• The injury is caused by alcohol or drugs, or
• When the employee violates a known employer safety rule

Other Things to Know About Workers’ Comp

An employee or an employee’s survivors are entitled to workers’ compensation coverage Part A when that employee is injured, disabled, or dies while on the job. These benefits are typically awarded on a no-fault basis. The exception is if the employee was under the influence and the substance(s) contributed to the injury or death.

Following an on-the-job accident, the employee is usually required to submit to a drug and alcohol test. If a worker is injured or killed while on the job, many fatal incidents provide partial reimbursement of lost wages and survivor benefits.

Part A satisfies the state insurance requirements. This is because it funds employees’ medical bills, related expenses, and lost wages when there is a covered loss. Payments, as a rule, are made based on the predetermined schedules when there are defined injuries. An adjuster then calculates and pays out expenses accordingly.

With workers’ comp, there are no policy limits. Under Part A, your insurer pays all benefits required by the workers’ compensation law of any state listed in the declarations.

Employers, however, can be held responsible for payments made by your insurer that exceed regular workers’ comp benefits. Such circumstances would include:

• Discharge, coercion, or discrimination against any employee in violation of the workers’ compensation law
• Failure to comply with health or safety regulations
• Knowingly employing workers in violation of the law
• Serious or willful misconduct

This article should not be considered legal advice. Questions about workers’ compensation insurance? Contact www.pinnacol.com or another workers’ compensation insurance provider.

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Source:

Pinnacol Assurance newsletter, “What’s covered by workers’ comp (and what isn’t)”, February 2024.