Test Your Workers' Compensation Claims Knowledge to Avoid Pitfalls

Perhaps the best teacher is a real-world scenario. But sometimes it pays to test your workers’ compensation claims knowledge before you’re faced with a complicated situation in real life. Here are two compensation claims scenarios and some tips to help you sharpen your claims knowledge and avoid common pitfalls. Let this be a launching point for discussion at your workplace on the workers’ compensation claims process.

Issue #1: Are Arizona and California workers’ compensation benefits payable to claimants without regard to the fault of the employee?

Scenario 
An employee arrives to work and is unable to enter the premises at the start of his shift. He forgot his key and doesn’t want to clock in late. If he is late one more time, he will be terminated. The employee decides to climb over the chain link fence to avoid lateness. As he is climbing the fence, he loses his footing, falls about five feet and lands on his right knee causing a significant contusion. He tells his employer he was injured and would like to see a doctor. What is the correct employer reply?

a. The employee should not be compensated for this claim. He was late and used poor judgment in climbing the fence.

b. The employee was on the employer’s premises and is therefore eligible for workers’  compensation benefits. Since California and Arizona are no-fault states as it relates to work-related injuries, this claim would be compensable.

c. The employee should be disciplined for not remembering his key. This resulted in a disruption in the workplace, lateness and causing the employer to report an avoidable injury.

Correct Answer: (b) and possibly (c) depending on your approach to employee discipline. California and Arizona are both no-fault states in the provision of workers’ compensation benefits. The claim is still compensable whether or not the injury could have been avoided by the employee exercising good judgment.

Issue #2: Work-related auto accidents – what are some little known factors?

Scenario 
The employee for a California company is driving back to the office after picking up tractor parts. While doing so, he is broadsided by another vehicle and seriously injured. The accident caused a number of broken bones, numerous surgeries and lost time from work to recover. The total claim value is approximately $300,000. The other party is determined to be at fault for the accident and carries a high level of commercial auto insurance. What are the best results for the employer?

a. The party responsible for the accident pays all treatment and reimburses the claimant for lost time as expenses occur. There is no need to open a workers’ compensation claim as everything is handled as part of the auto claim.

b. The employer reports this as a workers’ compensation claim. The employer is impacted significantly in higher premiums because of the high dollar claim viewed negatively by the underwriter. The claim takes more than two years before subrogation funds—or the recovery of paid insurance funds from a liable third party—is recovered by the workers’ compensation carrier. An increase to the experience modification factor, known as the x-mod, of the employer occurs. Put simply, the x-mod is a factor in determining the premium – the higher the x-mod, the higher the premium.

c. The claim is reported as a workers’ compensation injury, but periodic subrogation payments are made by the party at fault which keeps the claim value low. This does not impact the employer in higher premiums and/or higher x-mod.

Correct Answer: (b) Typically a carrier will not do a partial subrogation recovery. The norm is for subrogation to occur after the claimant is deemed fully recovered. Because of this, the claim shows a higher dollar amount for a longer time and has the greatest impact to the employer (higher premiums and higher x-mod).

There is one carrier in California that will not take the monies recovered and apply them to the cost of the claim. Are you wondering who that carrier is? As a broker, Western Growers Insurance Services can tell you that information and advise you of facts such as these when choosing a carrier for workers’ compensation insurance coverage. 

Also, consider these important questions in this scenario:

• Has the insurance broker for this employer been involved in providing claim updates to the insured?
• Has the broker explained to the underwriter who may be quoting for the next year’s renewal the circumstances which led to the accident and how it was not the fault of the insured or their employee?
• Has the broker worked with the carrier in getting paperwork filed with the Workers’ Compensation Insurance Rating Bureau so the x-mod can be revised downward when the monies are recovered through subrogation?

Contact us for more information about managing your worker's compensation claims or to find out how Western Growers Insurance Services can become your broker.