There are two kinds of insurance coverage that are required by law. If you own a vehicle, the law requires that you carry automobile liability insurance on it. If you own a business, and if you employ people to work for you in your business, you are required by law to provide WORKERS’ COMPENSATION coverage for them.

If an employer does not provide coverage for his employees, he is said to be in NON-COMPLIANCE with the law. A non-complying employer can be fined for failing to provide this coverage. If he continues in non-compliance, he can face further penalties and his business can be shut down. If an employee of a non-complying employer gets injured, the employer may end up paying out of his own pocket all costs of the injured worker’s claim.

There are exemptions to this requirements. They are listed in Oregon statute 656.027. Even though coverage is not required for these non-subject workers, if an injury occurs to a non-subject worker, the employer is not excused from paying for medical and rehabilitation costs, or the legal costs, that may ensue from the injury.

PART A of the coverage is WORKERS’ COMPENSATION INSURANCE. It covers Bodily Injury to employees in the course of their employment. It covers payment of bodily injury claims in full. It will also pay for time lost from work. If an injury is serious and requires rehabilitation or retraining, it will be provided by this coverage. If the injury is so serious that the employee is disabled, it will pay disability payments. There is no maximum limit of coverage under Part A.

PART A also lists the state that the coverage applies to. An Oregon policy covers employees who work in Oregon. The legislature of each state is responsible for the content of the workers’ compensation coverage that is available for that state. No matter what company an Oregon employer gets coverage from, his policy is identical in coverage to every other workers’ compensation policy issued in Oregon. The things that vary from company to company are the premiums charged, and the customer service and claims service, of each company.

If Oregon employees work outside the state of Oregon, or if the Oregon employer hires workers to work in another state, there is a high probability that the Oregon policy does not cover them, or that the state they work in will not recognize the Oregon policy as legitimate coverage for their state.

PART B of the policy is EMPLOYERS’ LIABILITY INSURANCE. This part provides liability protection for the employer if the employee decides to sue the employer for the bodily injury the employee suffered.

The standard limits of liability coverage for Part B are:

            BODILY INJURY BY ACCIDENT                $500,000 EACH ACCIDENT

            BODILY INJURY BY DISEASE                    $500,000 EACH EMPLOYEE

            BODILY INJURY BY DISEASE                    $500,000 POLICY LIMIT.

Injured employees seldom seek coverage under Part B. The reasons for this are: (1) Part B coverage is limited while Part A coverage has no maximum limit. (2) If an employee pursues a claim under Part B, the insurance company stop making payments under Part A, so the unlimited coverage of Part A would stop and there would not be any further payment until the claim is completely settled.

PART C of the policy is OTHER STATES INSURANCE: If a business has operations in other states, and the insuring company is willing to include coverage in those states on its Oregon policy, those states would be listed in this section.

WORKERS’ COMPENSATION PREMIUMS are based on:

  1. CLASS OF WORK: The types of work done by employees. There are over 600 different job classifications that employees may be classified under.
  2. ANNUAL PAYROLL: The amount of annual payroll paid under each job classification.
  3. RATE PER $100 OF PAYROLL: Every year, on January 1st, new rates per $100 of payroll are published by NCCI (National Council of Compensation Insurance) for the state of Oregon. Like many other states, Oregon is a member of NCCI and provides the rating data that NCCI uses to calculate Oregon’s annual rates.
  4. EXPERIENCE MODIFICATION: This rating factor applies only to employers with more than $2500 of premium per year and with coverage in force for two or more years.

At the beginning of coverage, the employer ESTIMATES the annual payroll. When the policy year ends, an AUDIT is done to determine the ACTUAL payroll for the policy year. If the audited payroll is higher than the estimated payroll, an additional premium will be due. If the audited payroll is less than the estimated payroll, there will be a refund of overpaid premiums.

In Oregon, the owners of a business can choose not to be included in this coverage. Or they can choose to be covered. Many owners choose to exclude themselves due to the cost of the coverage.

NCCI’S RESIDUAL MARKET: This is sometimes referred to as the ASSIGNED RISK POOL. When the law requires an insurance coverage, and an employer finds that no insurance company wants to offer him coverage, there has to be a source for obtaining this coverage. This is the source the state provides to employers who cannot obtain coverage elsewhere.

Major reasons why a business might end up in the residual market:

  1. If the employer has been in non-compliance (that is, has had employees but has failed to provide workers’ compensation for them);
  2. If the business has had a bad claims history;
  3. If the business has had a history of failing to pay its premium in a timely manner;
  4. If the business has failed to cooperate with the insuring company for inspections and audits.

This information is general in nature and should not be taken to replace the specific terms of an actual workers’ compensation insurance policy. As with all insurance coverages, refer to the actual policy that covers your interests for a complete and legal explanation of what is covered and what isn’t.

For more information regarding Oregon Workers' Compensation Insurance, go to the Oregon Workers" Compensation Division web page at http://www.cbs.state.or.us/wcd/.

In the State of Washington, workers' compensation insurance can be obtained only through the state. It is not available from insurance agents. For Washington information, go to http://www.lni.wa.gov/.

 

 

 

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Questions?

If you have questions concerning this information, please call us at 503-620-0230, or come in.

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