The dawn of the industrial age created large businesses with large workforces. Jobs were often very dangerous in nature and injuries or deaths were frequent in manufacturing, railroads, logging and farming. It was recognized that businesses benefited from the work of their employees to the extent that they should bear the responsibility of compensating the employees if an injury occurred. Laws were developed that constituted a trade off between a worker’s right to sue an employer and the employer’s responsibility to compensate the injured employee for medical bills and lost wages, and for compensating the worker’s family in the event of death. These are known as Workers Compensation Laws. While an employer bears responsibility for medical bills and lost wages, they become immune from having to pay for damages resulting from pain and suffering or punitive damages.
Workers compensation coverage is most often required by statute. Laws specify how an employer is responsible for medical payments, and to what extent wages must be reimbursed. There are also provisions that govern the type of recovery that can be sought depending on the specific type of injury a worker sustains.
Private insurance companies offer Workers Compensation policies to employers in return for premium. Premiums are often established as a rate that is associated with the dollar amount of a business’s payroll. It follows that a higher payroll generally means more workers and more risk, which could mean a higher potential compensation in the event of a loss. Premiums are also adjusted for the type of employer being insured. For example, dangerous jobs such as logging and mining cost far more to insure than safer jobs in office settings.
In some cases, certain industries involve work that is so dangerous that policies offered by private insurance companies are cost prohibitive. States will often provide funds to supplement private insurer’s policies or which function alone to provide workers compensation at an affordable rate. The reasoning behind a government-funded operation such as this is that it promotes business development. Without such a plan, many businesses would not be able to afford workers compensation insurance at all and they would be unable to conduct business.
When a worker’s compensation claim occurs, laws are generally set up to allow for the proper medical treatment of the individual and for a reasonable way to replace that person’s income. In some cases, the income is simply paid by the insurance carrier but it is often limited to a maximum dollar amount by statute. This if often far below the worker’s regular wage, which can cause a hardship on the employee. If the worker is partially disabled, there are provisions to help that person find suitable work in a different environment. For example, someone that was injured as a logger and who cannot resume his normal work due to injury, could be assisted in finding a suitable light duty job that utilizes much of that person’s background and knowledge but in a different setting such as training, or management of the logging operation.
While there is not always an ideal outcome when an employee is injured, workers compensation insurance provides employees needed protection that can help to maintain their lives and livelihood in the event of an injury.