Since the beginning of 2020 when COVID 19 made its entrance into the U.S., employers, and workers are asking a lot of questions regarding workers’ compensation insurance and COVID 19.
Although many businesses were shut down and told to ride out the storm, a large number of businesses were considered “essential” and were told to continue operating until the pandemic burned itself out.
The public knows, as of today, that the burn-out hasn’t happened but the number of hospitalizations and deaths resulting from COVID has begun to drop significantly.
Many governors across the country are giving businesses the green light to get back to work as long as they abide by safety issues put out by the government.
As businesses begin to reopen and workers find a way to experience some type of normalcy, both employers and workers are asking questions about workers’ compensation insurance coverage since so many businesses are required to carry this insurance.
Below, we have listed frequently asked questions that insurance companies, agencies, and law firms specializing in workers’ comp claims are asking (in no particular order).
Is COVID-19 compensable (covered) under most state’s workers’ compensation acts?
Regretfully, the answer here is “maybe” and here’s why. Although workers’ compensation insurance does cover occupational diseases that are linked to a worker’s course of employment in most states the policy does not provide coverage for “ordinary diseases of life” such as the yearly flu or common cold.
Regretfully, even with occupations that are designated as essential, such as physicians, nurses, first responders, and EMTs, workers’ compensation insurance will most likely not respond with coverage.
If you are employed in a state where NCCI is the rating or advisory organization feel free to refer to this NCCI Compensability Survey.
If a business temporarily suspends operations because of COVID but continues to pay employees who stay home and aren’t working, are the payments to these employees considered payroll for workers’ compensation?
All payroll is considered when calculating workers’ compensation insurance premiums whether an employee is working or not working. The employer can, however, reclassify these employees to the lowest rate class allowable as long as the employer maintains separate payroll records for the employees who are placed in a different occupation.
Additionally, when these employees eventually return to work, the employer would need to re-classify them back to the occupation they previously held.
Has any governmental action been taken that directly impacts the state-based workers’ compensation program?
As of the published date of this article, no regulatory action has been advanced that would affect the established rules and guidelines in the workers’ compensation insurance system.
Although there has been discussion of the House Financial Services Committee considering a Pandemic Risk Insurance Act, no legislation has moved out of committee or has been introduced.
Will COVID-19 impact Workers’ Compensation Insurance Audits?
Yes, if approved, NCCI Item Filing B-1441 states that if audited exposure cannot be reported because of emergency orders being issued due to COVID, the applicable exposure and insurance premium may be reported in the class code or codes and therefore the Estimated Audit Code would be reported as “N.”
Will a Workers’ Compensation Insurance Company be able to adjust the premiums of in-force policies due to estimated changes in classifications and payroll amounts?
Yes, insurance carriers do have the ability to modify classifications and payroll amounts by way of midterm endorsements, subject to individual state-approved endorsement forms.
Should an employer payments to furloughed employees be used to calculate the insurance premium for the terrorism or catastrophe provisions?
No. According to Basic Manual Rule 3-A-24 premium for terrorism/catastrophe is calculated on the basis of total payroll according to Rule 2. NCCI Item Filing B-1441 established Basic Manual Rule 2-B-2-n, which provides that payments made by an employer to paid furloughed employees as a result of federal, state, and/or local emergency orders, laws, or regulations issued for the COVID-19 pandemic (and reported to Code 0012), are excluded from payroll.
If an employer agrees to pay its employees more as an incentive for them to keep working during the COVID-19 pandemic, is the incentive included as payroll to calculate the Workers’ Compensation Insurance premium?
Yes, all payroll is considered for calculating a business’ workers’ compensation insurance premium.
Where can an employer find a legislative activity that is state-specific regarding COVID-19
An employer can find its state regulatory and legislative activity relating to COVID-19 at the COVID-19 Resource Center at NCCI.com.
As you may have found by reading this article, the rules and regulations regarding workers’ compensation insurance can be confusing and even difficult to understand.
Although we feel employers should certainly stay informed, we recommend employers to contact their agent or company with any questions relating to workers’ compensation insurance and COVID-19.
Moreover, if you have questions about whether COVID-19 can impact other insurance policies in your commercial portfolio, please call your agent for those policies as well.
If you feel that now might be a good time to review all your insurance coverage or if you’d like to line up with an experienced and reputable insurance broker who can become your number one resource for commercial insurance, call Fairbanks Insurance Brokers at 949-595-0284 or contact us through our website.
Here is What We Recommend
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.