Summary: Domestic, agricultural, and casual employees are not treated in a uniform manner under the workers compensation (WC) mechanisms of the various states. Some states have amended their workers compensation laws to include domestic and agricultural employees either on a compulsory basis (without exception or within certain guidelines, such as when the length of service exceeds a certain time period or the payroll in these categories exceeds a certain amount), or to allow employers to provide coverage voluntarily.Alternatively, a certain amount of liability protection is available in some state jurisdictions to employers under policies such as the homeowners, farmowners, and personal liability. These policies provide for defense and settlement of claims lodged by employees who are exempt from the workers compensation law. In states where such employees fall subject to workers compensation law, these policies will not respond, due to a liability exclusion explained below.
This article presents a discussion of workers compensation coverage for domestic and agricultural employees under various options.
Topics covered:
Coverage under personal liability policies
Voluntary compensation coverage
Employees subject to compensation law
Classifications
Coverage under Personal Liability Policies
The personal liability policy and homeowners policies cover liability of the insured arising out of injury to domestic employees; the medical payments portion of those policies can also apply to the medical and funeral expenses of domestic employees, or “residence employees” as they are called in the coverage forms (this term, incidentally, is defined as an employee of an insured whose duties are related to the maintenance or use of the residence premises, including household or domestic services). The farmowners policy also may be endorsed to provide the same coverage on farm employees. Thus, insureds under any one of these noted policies are protected against liability claims that may be brought by employees, and may also be able to obtain an amount of medical protection payments for their employees.
All of those policies, however, exclude both liability and medical payments coverages to any employee of the insured who is entitled to workers compensation benefits. Coverage also is excluded when benefits are payable or required to be provided under a workers compensation law. So, for example, if a state makes workers compensation insurance mandatory for domestic or agricultural employees, the coverage of those personal liability policies becomes invalid. The rationale for these exclusions is to prevent overlapping coverages.
There are many insureds, however, with one or more employees, domestic or farm, who, for various reasons, desire to provide compensation coverage for employees not statutorily protected in that jurisdiction. To people in this situation, providing workers compensation benefits seems most desirable, particularly after it is pointed out that these benefits go further than those available under medical payments coverageindemnity during disability, awards to dependents in case of death, etc. Such statutory benefits can be obtained for employees by purchasing voluntary compensation insurance.
Voluntary Compensation Coverage
Voluntary compensation coverage is intended to correspond to that of statutory benefits. Coverage provided under voluntary compensation insurance is identical to that for employers and employees required to be insured under the law. The endorsementwhich is attached to the standard workers compensation and employers liability policy and is designated WC 00 03 11states, “we will pay an amount equal to the benefits that would be required of you if you and your employees described in the schedule were subject to the workers compensation law shown in the schedule. We will pay those amounts to the persons who would be entitled to them under the law”. In other words, benefits are provided for injuries that would have been compensable in the same manner as they would have been provided had the employment been subject to any applicable workers compensation laws.
The insurance provided by this endorsement applies to bodily injury sustained by an employee in the group of employees described in the schedule. The bodily injury also must occur in the course of employment necessary or incidental to work in a state listed in the schedule and must occur during the policy period. The insurance does not cover any obligation imposed by a workers compensation law or bodily injury intentionally caused or aggravated by the named insured.
As befitting the voluntary nature of this endorsement, it states that before any payments are made to those entitled to them, the beneficiaries must release the insured and the insurer, in writing, of all responsibility for the injury. Any right to recover from others who may be responsible for the injury must be transferred to the insurer and the injured party must cooperate fully with the insurer in enforcing the right of recovery. Additionally, the endorsement declares that if the persons entitled to the benefits of the insurance fail to do those things just noted, or if they claim damages from the insured or the insurer, the duty to pay under this endorsement ends at once.
WC 00 03 11 can be used to cover all employees, like domestic or farm workers, who are not subject to the workers compensation laws and it can be attached to an existing workers compensation policy that is in place for those employees that are required by state law to be covered by workers compensation insurance. This is an appropriate course for a business that employs workers and needs a compensation policy, but what about a homeowner that wants WC coverage for a domestic worker, like a housekeeper or gardener? In that case, endorsement WC 00 03 12 is the fitting manner of coverage.
WC 00 03 12 adds voluntary compensation and employers liability coverage for residence employees to a homeowners policy, a personal liability policy, or some other policy that provides similar personal liability coverage. The insurance applies to bodily injury by accident or disease sustained by the named insureds residence employees and must arise out of and in the course of employment by the named insured. The insuring agreement, exclusions, and other provisions of WC 00 03 12 are similar to those of WC 00 03 11, but there is an important point to mention. In keeping with the “personal” as opposed to the “business” flavor of WC 00 03 12, there is an exclusion that states that coverage does not apply to bodily injury arising out of any of the named insureds business pursuits.
Employees Subject to Compensation Law
In jurisdictions where domestic, agricultural, and casual workers fall subject to the workers compensation law, the employer is required to provide coverage; as previously noted, even the limited protection of personal liability forms is unavailable to insureds in these jurisdictions. In these states such employees are entitled to the same benefits as any worker protected by compensation laws. There are two methods available for arranging this coverage.
One method is simply to issue a standard workers compensation and employers liability policy designating the domestic, agricultural, or casual workers in the policy.
The second method involves the use of the workers compensation and employers liability coverage for residence employees endorsement, WC 00 03 14, issued by the National Council on Compensation Insurance. This endorsement basically contains the same provisions as the standard workers compensation and employers liability policy, and is to be attached to a standard personal liability policy, a homeowners policy, or any policy affording similar personal liability coverage with respect to the residence premises of the insured. The effect is the same as if the employee were covered by a standard WC policy since the insurer agrees to pay benefits required by the respective WC law.
A few jurisdictionsfor example, New York and New Hampshirehave enacted legislation that goes beyond the mere inclusion of domestic employees in the workers compensation system and have mandated the manner in which coverage is to be provided. For example, a New York law provides that all homeowner policies issued in New York providing personal liability insurance on a one through four family, owner-occupied residence also provide coverage against workers compensation liability to certain persons who work less than 40 hours per week. The effect of this act is to place the responsibility for providing workers compensation coverage on each insurer writing personal liability insurance in the state, rather than on the employer of the domestic worker; and, it provides an inexpensive and convenient means for homeowners. for example, to obtain WC coverage when it is mandated. It does not, however, provide elective coverage for employees for whom coverage is not mandated by law.
Classifications
There are four domestic employee classifications. For these classificationsdomestic workersinside, occasional domestic workersinside, domestic workersoutside occasional domestic workersoutsidethe premium is determined on the basis of the WC rules and rates in the workers compensation manual for the state(s) designated in the schedule.
The difference between inside domestic workers and outside domestic workers must be understood because the rates for outside domestic workers usually are higher. These terms, inside domestic workers and outside domestic workers, refer to the duties of those employees and not to the fact they may live on the insureds premises. Inside domestic workers are those whose principal duties are inside, such as a cook, a nurse, or one who performs general inside chores. Outside domestic workers are those who work principally outside the residence, such as a chauffeur or a gardener.
A minimum premium applies for each classification but when two or more classifications apply, only the highest minimum premium is charged.