Chapter 18 Flashcards
Which of the following statements about workers’ compensation is NOT correct?
A) An employee must accept the benefits mandated by law.
B) An employee who is eligible for workers’ compensation coverage may sue a negligent employer.
C) Workers’ compensation covers work-related injuries.
D) Most occupations are subject to state workers’ compensation laws.
Answer: B
Workers’ compensation, which takes the form of a specified monetary benefit to the employee after a work-related injury, is paid without any consideration of fault or negligence on the part of either the employer or employee. It is an exclusive remedy, which means that the employee cannot sue the employer for work-related illnesses or injuries. It is also a certain remedy, for which the employee gives up the right to sue the employer for what could be a larger but uncertain benefit. Workers’ compensation laws apply to most occupations.
Which one of the following statements about workers’ compensation insurance is CORRECT?
A) The legal foundation for workers’ compensation is the doctrine of tort liability.
B) The Social Security Administration handles the administration of workers’ compensation benefits.
C) Employers’ liability insurance is the same as workers’ compensation coverage.
D) Workers’ compensation benefits apply without regard to the employer’s negligence.
Answer: D
Workers’ compensation is a kind of no-fault insurance. Injured workers may receive benefits without having to prove that their employer was negligent. Typically, employers’ liability insurance and workers’ compensation insurance are found in the same policy but they are not the same coverage.
Which one of the following statements regarding workers compensation laws is CORRECT?
A) An injured worker must prove negligence on the part of the employer.
B) Workers compensation is governed at the federal level.
C) Workers compensation is optional.
D) Benefits are paid to workers injured on the job regardless of who is at fault.
Answer: D
Workers compensation benefits are paid to workers who suffer job-related injuries or diseases without consideration of fault or negligence. Workers compensation is regulated at the state level. All states but Texas have compulsory workers compensation laws. In these states, every employer must provide the benefits and amounts stipulated in the laws or face penalties for noncompliance.
What is the primary purpose of workers’ compensation laws?
A) Providing benefits to workers who are laid off.
B) Providing job security.
C) Providing compensation to employees who have sustained injury, illness, or death during the course of employment.
D) Making the workplace a safer environment.
Answer: C
Workers’ compensation provides a just and fair means of compensating employees who have sustained injury, illness, or death during the course of employment.
What is the primary purpose of workers compensation?
A) Improve employees’ working conditions.
B) Provide compensation to employees for injuries arising out of their employment.
C) Pay benefits to employees that are temporarily laid off.
D) Provide accident insurance for employees, both on and off the job.
Answer: B
Prior to the advent of workers compensation, most employees injured on the job went uncompensated, creating an economic burden for themselves, their family, and society. Workers compensation was introduced to provide a remedy for this situation.
Workers compensation pays:
A) only when the employer is negligent.
B) only when another employee is negligent.
C) only when the employee is at fault.
D) without regard to fault.
Answer: D
The problem with fault and negligence as the basis of recovery for employee injuries is that the defenses available to employers were extremely difficult to overcome, leaving many injured workers uncompensated. Modern workers compensation regulation took fault and negligence out of the equation for compensation and made employers responsible for injured worker benefits without regard to fault.
Bob’s TV store needs workers’ compensation coverage for his employees. He could purchase coverage from all of the following sources EXCEPT:
A) self-insurance.
B) an assigned risk plan.
C) an insurance company that writes workers’ compensation.
D) the state if it is monopolistic.
Answer: A
Self-insurance is simply the retention of risk. The company sets aside funds to meet projected losses rather than purchase coverage elsewhere. If the company is not able to demonstrate to the state that it has the financial resources to cover losses, the state will require that the company purchase insurance.
Which one of the following statements about workers compensation insurance is NOT correct?
A) Self-insurance of workers compensation is permitted.
B) Every type of employment is subject to workers compensation laws.
C) Workers compensation policies provide benefits for rehabilitation.
D) Coverage for lost wages is a benefit of workers compensation insurance.
Answer: B
Every state excludes some types of jobs from workers compensation coverage. Possible exceptions include corporate officers who are sole shareholders, domestic employees who work a limited number of hours, and agricultural workers. When benefits are not required by law, an employer still may provide them on a voluntary or elective basis.
Which one of the following is NOT a benefit of workers compensation insurance?
A) Rehabilitation costs.
B) Pain and suffering.
C) Lost wages.
D) Medical expenses.
Answer: B
Pain and suffering is not a type of benefit covered by workers compensation insurance.
Which one of the following determines the amount of a workers compensation claim?
A) Federal law.
B) Mandate of the Commissioner.
C) Agreement of the parties.
D) State law.
Answer: D
State law fixes the amount of compensation in a workers compensation claim. The compensation is paid without consideration of fault or negligence on the part of either the employer or employee. In exchange for this right of compensation, the employee gives up the right to sue the employer.
All of the following are benefits specified by workers compensation laws EXCEPT:
A) lost wages.
B) medical expenses.
C) rehabilitation benefits.
D) retirement plan contributions.
Answer: D
Workers compensation laws provide that injured workers are compensated for their lost wages, the cost of covered medical expenses, death benefits, and the cost of rehabilitation. The laws do not provide for retirement plan contributions.
Occupational diseases are covered under workers’ compensation. All of the following are occupational diseases EXCEPT:
A) chicken pox that is contracted at work.
B) exposure to chemicals on the job that lead to cancer.
C) black lung disease for a coal miner.
D) cancer contracted by workers working with asbestos.
Answer: A
Coverage for occupational diseases is limited to those that arise out of and in the course of employment. Chicken pox is not an occupational disease because it is not peculiar to the employment.
Which of the following individuals would be eligible for workers’ compensation benefits?
A) Employee who falls on a wet factory floor.
B) Employee who has a heart attack on the job.
C) Employee who falls in a restaurant while on her lunch break.
D) Employee who has an auto accident on the way home from work.
Answer: A
The other examples did not arise out of employment or in the course of employment.
Which one of the following individuals is likely to have a valid workers compensation claim?
A) Employee injured while performing a task for which he had not yet been trained.
B) Retired employee injured while visiting his old workplace.
C) Employee who suffers a diabetic coma from failure to take prescribed medicine.
D) Sole proprietor injured in an auto accident while driving to a friend’s house.
Answer: A
First, to be covered an injury must occur on the job or arise out of the employee’s work. Therefore, neither the claim of the retired employee or the sole proprietor would be covered. Second, negligence is not an issue. To qualify for workers compensation, an employee must have experienced a work-related injury, and, while the definition of work-related has been considerably broadened over the years, failure to take prescribed medication would not be considered an accident unless the job interfered with the employee’s ability to take it.
Workers’ compensation laws cover employees in the course of employment. Some classes of workers, such as domestic servants, are exempt but may be covered by a voluntary compensation endorsement. This endorsement agrees to pay benefits:
A) to all employees.
B) to employees who are exempt only.
C) only if the employer requests that benefits be paid.
D) to employees not covered or exempt.
Answer: C
In a monopolistic state the coverage must be purchased from the state-run insurer. The 5 monopolistic states are North Dakota, Ohio, Washington, West Virginia, and Wyoming.
In states that use the workers’ compensation competitive state funds method, all of the following would typically be viable options available to an employer EXCEPT:
A) purchasing coverage from the state fund only.
B) purchasing coverage from a private insurance company.
C) if the employer meets certain criteria, providing coverage through self-insurance.
D) purchasing coverage from the state fund.
Answer: A
In states using the competitive state funds approach, employers are not limited to only being able to purchase workers’ compensation insurance from the state fund. Other options are available, including those listed in the other answer choices.
In most cases, an injured employee receives payments under workers compensation insurance from whom?
A) State Department of Employment.
B) Insurance company.
C) Employer.
D) Division of Workers Compensation.
Answer: B
For the vast majority of workers compensation claims, the injured worker receives payments directly from an insurance company. An exception is if the employer has decided to self-insure and has obtained state approval for the self-insurance plan. While companies that self-insure are large and have many hundreds of employees, these represent a small percentage of the total number of employees covered by workers compensation in the United States.
Pete’s construction company has had some loss problems. Pete’s carrier has informed him that his workers’ compensation policy will not be renewed. What is Pete’s best option for obtaining replacement coverage?
A) Self-insurance.
B) The Federal Employer’s Liability Act.
C) The Jones Act.
D) Assigned risk plan.
Answer: D
An assigned risk plan is Pete’s best choice because his carrier must cover his company. He could self-insure, but only if he meets all the state requirements.
Coverage for workers’ compensation may be obtained from all of the following EXCEPT:
A) self-insurance.
B) a commercial general liability policy.
C) assigned risk plans.
D) the Federal Employers Liability Act.
Answer: B
Workers’ compensation is included in state assigned risk plans, the FELA, and company self-insurance plans. A commercial general liability policy excludes workers’ compensation claims because they are more appropriately covered elsewhere.
The insurer retains certain rights under the conditions section of a workers’ compensation policy. Which of the following is one of those conditions?
A) The insurer retains the right to inspect the insured’s workplace for insurability when the insured can arrange it.
B) The insurer does not have the right to inspect the insured’s workplace for insurability at any time.
C) The insurer retains the right to inspect the insured’s workplace for insurability at any time.
D) The insurer retains the right to adjust the premium if the loss experience becomes worse.
Answer: C
The insurer retains the right to inspect the insured’s workplace for insurability at any time. The insurer, however, is not obligated to do so.
The purpose of employers’ liability insurance is to provide
A) insurance for high-risk employers.
B) liability protection where workers compensation does not apply.
C) excess workers compensation benefits.
D) voluntary workers compensation benefits.
Answer: B
Where workers compensation laws do not apply, injured workers are still entitled to sue their employer. Employers’ liability insurance is available for those situations.
The standard workers compensation policy imposes all of the following duties on the employer EXCEPT:
A) immediately notify the insurance company of a work related injury.
B) provide for immediate medical services as required by law.
C) make voluntary payments to an injured employee.
D) cooperate with the insurance company.
Answer: C
The benefits an injured employee is entitled to receive are specified by law, so there is nothing voluntary about them. The insured employer’s duties in the event of a loss include notifying the insurer promptly of all legal notices or demands as well as providing immediate medical services, cooperating with the insurer, and immediately notifying the insurer of a work-related injury.
Bob’s construction company, based in Wisconsin, is doing a job in Illinois. Bob’s declaration page for his workers’ compensation policy lists Minnesota, Iowa, Illinois, and Wisconsin as states where he will do work. Pete, an employee working in Illinois, is injured on the job. How would Bobs’ policy respond?
A) Pay benefits only if Bob is held liable.
B) Pay benefits based on Illinois workers’ compensation laws.
C) Pay benefits as if Pete had been injured in Wisconsin.
D) Pete may choose coverage under the benefits that are best for him.
Answer: B
Because Illinois is a state listed on Bob’s declaration page, benefits will be paid under the statutes in the state of Illinois. Coverage does not apply in states not listed on the declarations page as long as the company was doing business when the policy commenced.
All of the following could create an employers liability loss EXCEPT:
A) lawsuit brought by an injured worker’s spouse.
B) an employee not covered by the workers’ compensation law.
C) personal injury.
D) legal defense costs.
Answer: C
Personal injury is not covered under Part Two of the workers’ compensation policy. An injury to an employee due to employer negligence in a situation not covered under workers’ compensation is covered under employers liability.
