Teaming AD&D With WC

Adds Weight To Coverage

While industry in the United States is safer than ever before, accidents still occur. Some 15 American workers die on the job each day, and U.S. businesses spend $171 billion a year on the financial costs associated with occupational injury and illness, according to National Jury Verdicts Review & Analysis.

This is especially costly to companies in hazardous fields, such as energy, petrochemicals, chemical processing, mining, electrical utilities, construction, trucking and convenience stores. Risk managers in hazardous industries, however, can benefit in a number of ways by supplementing their workers' compensation coverage with accidental death and dismemberment.

A bonus to adding AD&D coverage to a workers' comp plan is that it gives employees in hazardous industries greater coverage it usually is difficult for workers in hazardous industries to obtain AD&D coverage. An added benefit for employers is that having AD&D coverage for workers in hazardous jobs may help keep down premiums on a company's general liability policy.

Much is at stake for employers. Workers' comp no longer is enough to cover companies for extraordinarily costly lawsuits. Courts increasingly are allowing employees or their heirs to sue in cases where it is alleged that the accident or cause of death was due to the company's negligence. And the awards could be large enough to put a company's financial viability in danger.

In Washington State, for example, a jury recently awarded $17.5 million to a man who lost both arms and was paralyzed after touching a 14,400-volt power line while installing a vinyl billboard.

In Western New York, a jury awarded $23.4 million to a roofer paralyzed in an on-the-job accident. In Minnesota, the family of a factory worker whose skull was crushed between a moving mechanical arm and a conveyor belt was awarded $35 million. And the list goes on.

Because workers' comp may not provide enough coverage, employees or their heirs often believe they have no option but to sue. In Texas, for example, the stated death benefit is only $6,000. Even in states that require higher awards, workers' compensation seldom guarantees a family's financial security.

Some AD&D policies provide anywhere from $50,000 to $250,000 on a no-fault basis. If a worker earns, say, $50,000 a year, $250,000 would represent five years' salary.

By offering AD&D products to clients, brokers can earn more revenue without expending much additional time. And the wealth of knowledge many brokers have of workers' comp can easily be utilized in the AD&D realm.

All companies that operate in hazardous industries can benefit from adding AD&D to accompany workers' comp coverage, but it is especially useful to medium-sized companies those with 500 to 1,000 employees. Huge companies often outsource hazardous jobs to midsized firms, or have general liability policies with wide umbrellas.

Due to regulatory complexities, AD&D policies may not be embedded in workers' comp coverage. Thus, service companies are prime candidates for the workers' comp and AD&D policies. Unlike multinational corporations, these midsized firms often can't afford more expensive plans. Many don't have any benefit plans, and some depend heavily on seasonal labor who are not eligible for such plans, even if available.

To sum it up, brokers, underwriters, risk managers and employees can all benefit when a property and casualty product workers' comp is teamed with AD&D. The two go together naturally, and require little extra time and effort on the part of the broker, and only a slightly greater expenditure by companies and organizations.

Ron Clarke is a vice president of A&H at AIG Global Energy in New York. He can be contacted at ronald.clarke@aig.com.

Reproduced from National Underwriter Edition, April 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Teaming AD&D With WC Adds Weight To Coverage

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