How important is workers' compensation in a business?
Given the global effect of COVID-19 now across all industries, with many businesses closing, is getting this program still relevant?
To understand this coverage, let us define it further:
"Workers’ Compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence.”
Workers' compensation aims to cover employees who get injured on the job by compensating them with lost wages, medical care including vocational rehabilitation, as needed. But the question now is, is this still relevant? Given the challenge posed by this pandemic, how can business owners still cope?
A Journey in History
It is fascinating to know that compensating workers is an age-old concept. There was a popular belief that laborers in the ancient world are mostly “slaves” with only as much right as their owners' livestock. The truth is much more than that. It's not all about building the great pyramids of Egypt.
Workers’ compensation dates back as far as 2050 B.C. in ancient Sumer or what is more popularly known in the present day as Iraq. Ancient Sumerian law has a law compensating for a worker’s injury on specific body parts. An example is placing the value of the thumb with a value of half a finger. Other cultures have their own take on this also. Ancient civilizations like the Chinese and Romans also have similar systems compensating a worker based on the disability incurred while performing his task. It’s noteworthy to say that some of these are still being applied today.
The Renaissance period paved the way for the development of a framework that leads to the early Industrial Revolution in Europe and America. To help determine the types of injuries to be compensated, they make use of the following principles: "Contributory Negligence Principle", the “Fellow” Servant Principle" and the "Assumption of Risk Principle".
The first is "Contributory Negligence". When the injury occurred due to the worker’s own negligence or his own failure to follow safety protocols. This can be used as a basis to remove any responsibility from the employer.
The “fellow servant” rule removes liability from the employer if the worker’s injuries were due to the negligence of a fellow worker.
The “assumption of risk” rule is what was popularly known back then as “worker’s death contracts” or “worker’s right to die”. These are often indicated in jobs with obvious high risk or occupational hazards. It is a work in your risk case. Their employees will just provide the minimum required and considerable safety measures for their job. The downside of this is, by signing up he agrees to the conditions in the contract. Therefore, he won't be able to sue his employers anymore should he get injured or even die on the job.
These rules were made to protect both employers and workers; however, the process tends to get too tedious at most. Most workers had to use tort or non-observance of a person’s right to get his compensation to get a claim. As then until now, legal matters for personal injuries tend to be too expensive for the worker. It was also not usual for a common worker to win cases because of these hefty fees. Thus some private organizations were formed to offer workers the option to get their own disability insurance to protect themselves.
Adapting Workers Compensation in America
As the influence of social media in the 21st century, so was the effect of most literary materials in the 1800s and early 1900s. Literary pieces in the likes of Uncle Tom’s Cabin have launched many societies to fight for their civil rights.
The cause of Workers’ Compensation, was championed by an unlikely author Upton Sinclair in 1906. He authored “The Jungle” a novel which narrated graphically the horrid conditions experienced by a Lithuanian man in Chicago slaughterhouses. The book became very popular because it pushed the public to clamor for reforms.
The Food and Drug Act of 1906 and the Meat Inspection Act of 1906, an Act that paved the way for the Modern Food and Drug Administration was the first reform that was made after that public clamor. The Employers’ Liability Acts of 1906 and 1908 dealing on the contributory negligence rule was also soon passed in Congress.
Efforts to pass comprehensive workers’ compensation acts in New York (1898), Maryland (1902), Massachusetts (1908), and Montana (1909 were made. Due to the varied stance of the representatives, these had to be left according to what will work best and fit per state. Later, the first compensation system protecting workers involved in interstate commerce was eventually put into law in 1908 upon the proposal of President Taft.
Wisconsin was the first to pass a comprehensive workers’ compensation law in 1911. In the same year, nine other states followed: California, Illinois, Kansas, Massachusetts, New Hampshire, New Jersey, Ohio, and Washington. In 2012, the following states followed: Maryland, Michigan, and Rhode Island. In 1913, ten more followed: Arizona, Connecticut, Iowa, Minnesota, Nebraska, Nevada, New York, Oregon, Texas, and West Virginia.
By 1914 Louisiana and Kentucky also passed the program. By 1915, eight more states followed: Colorado, Indiana, Maine, Montana, Oklahoma, Pennsylvania, Vermont, and Wyoming. The list was followed by Idaho, New Mexico, South Dakota, and Utah in 19017. Virginia was the only state to pass the law in 1918, followed by the following states in 1919: Alabama, North Dakota, Tennessee, and Missouri. Georgia followed in 1920 and North Carolina in 1929. Two more states followed in 1935, Florida, and South Carolina. The last two states to pass this law was Arkansas in 1939 and Mississippi in 1948.
The Importance of Workers Compensation
Ever since it started, the workers’ compensation program was meant to provide coverage for medical and wage benefits for the worker in case of injury. Without this protection, workers used to file cases against their employers under the negligence liability. Due to the tedious processing and high costs of filing these complaints, many employees were not able to get what is due to them. This was proven to be inconvenient to employers as well. With this program in place, both parties are able to meet their needs. The employee in effect frees his employer from any liability once he accepts the policy. This is also a requisite for employers across most states - whether their employees work full-time or part-time. It actually provides a safety net for both the employee and the employer.
This policy can also provide further benefits for his dependents in case the employee gets disabled or killed on the job. This also frees the employer from lawsuits arising from any such incidents.
An additional feature of this policy is the employer’s liability insurance which protects the employer from a possible litigation. On top of this, the employer can also benefit from this policy by applying the same benefits to themselves.
Understanding Outbreaks, Endemic, Epidemic and Pandemic
The US is no stranger to diseases that either brought a halt to normal living or totally put everything on a standstill. It differs from an outbreak, epidemic, and pandemic. To understand it better, let’s define these terminologies:
- EPIDEMIC refers to the disease affecting a large or significant number of people within a community, population, or region.
- PANDEMIC refers to an epidemic that’s spread significantly over multiple countries or continents.
- ENDEMIC refers to a condition-specific only to a particular people group or country.
- AN OUTBREAK is when a condition starts to spread significantly within a population or group of people. If it’s not controlled fast enough, an outbreak can become an epidemic.
Below are some of the epidemics and pandemics that have plagued the country over the years:
Smallpox. This disease infected Native Americans when European settlers brought it with them in North America between the period of 1633-1634. The infection continued to spread until the disease reached the west. It is characterized by high fever, chills, severe back pains, and rashes. By 1721 in Boston alone, 6;000 out of the 11,000 population were reported infected already and around 850 people died from smallpox. The vaccine was developed by Edward Jenner in 1770 which effectively stopped the spread of the disease. In 1970, this was totally eradicated after a massive vaccination initiative in the United States.
Yellow fever. This disease was unfortunately carried by refugees from the Caribbean Islands into Philadelphia in 1793. Yellow fever is characterized by the yellowing of the skin, fever, and vomiting with a flood. Around this time, approximately 10% of the population succumbed to the disease and a mass evacuation followed to escape the virus. It was only in 1953 when a vaccine was finally developed and licensed to fight the virus. The spread of the disease was found due to mosquito bites. This was the same in the cases of Central America, South America, and Africa. The disease was eradicated with the destruction of the mosquitoes' breeding ground.
The Choleravirus came to the United States between 1832 to 1866 in three waves. It is characterized by a serious intestinal infection. It traveled from India and spread worldwide through trade routes. The first state to be hit was New York and it immediately hit about 5-10% of its population. Many also died during the course of the infection. It ended by the early 1900s with surprisingly no clear treatment to be attributed to it. Immediate treatment given to infected patients includes antibiotics, zinc supplements, and rehydration. Some say it could also be due to change in the weather or quarantine efforts. Sadly, it also left more than 95,000 deaths. By now, to prevent contamination is by washing the hands with soap and water, as well as avoid drinking unclean water.
Scarlet fever. In 1858, a new virus emerged in waves again. It’s a bacterial infection and affects children from 5 to 15 years old. According to studies scarlet fever or strep throat disease eventually declined due to better nutrition and most likely because of improved public health. Treatment includes antibiotics.
Typhoid Fever is perhaps the most unassuming but one of the deadliest viruses in this list. It is considered as one of the biggest epidemics of all time, from 1906 to 1907. Mary Mallon was a cook in New York in an estate and a hospital unit. She was asymptomatic and because of this, she unwittingly spread the virus directly to 122 New Yorkers, 5 of which died with the virus. Over time, there were about 13.160 deaths in 1906 and 12,670 deaths in 1907.
The disease was characterized by red spots forming on the chest and abdomen and can really cause serious illness. Not surprisingly, it is highly contagious and may be spread due to direct contact with an infected person, consuming contaminated food, and drink. .The vaccine was eventually developed in 1911, while an antibiotic for it only became available in 1948.
H1N1 Fluis a type of flu strain that is very much active until now. It was the virus behind the influenza pandemic also known as Spanish Flu. What’s disturbing about this virus is its capability to mutate - making previous treatments or vaccines less effective for the succeeding strains. Aside from vaccination, the treatment also includes bed rest, hydration, and antiviral medication.
Diphtheria is characterized by enlarging the mucous membranes like the throat, obstructing the patient’s breathing. If the bacteria enter a patient’s bloodstream, it can cause adverse damage resulting in fatal and nerve damage. It wreaked havoc between 1921-1925 and during this time, left behind around 206,000 cases. It was only by the mid-1920s upon the introduction of the vaccine did cases started to go down.
Polio is also a viral disease that damages the nervous system resulting in paralysis. This is a highly contagious disease. It spread in the United States around 1916 and 1952. There were around 3,145 deaths out of the 57,628 reported in 1952. The vaccine developed by Dr. JOnas Salk was finally approved in 1955 resulting in a big drop in cases in 1962. By 1979, the country had been declared polio-free already.
Next on the list is the H2N2 Flu virus in 1957. This was considered to be a major flu outbreak back in 1957. The H2N2 virus or avian flu was first discovered in Singapore and Hongkong and reported in the United States by the summer of the same year of 1957. Although there were around 116,000 deaths in the United and another 1.1 million worldwide attributed to H2N2, it didn’t spread much more. A vaccine was developed easily from the initial vaccine used to treat H1N1. To date, it does not affect humans anymore and is still lethal to birds and pigs.
Measles. Another outbreak spread between 1981-1991, considered to be another recurrence. Considered to be another contagious virus spread by air. It is characterized by fever, runny nose, cough, red eyes, and sore throat with rashes all over the body. It affects children mostly because of inadequate vaccines resulting in the second round of vaccines for everyone. Eventually, by 2019, cases have dropped significantly already.
Milwaukee water contamination. In 1993, a bacteria known as cryptosporidium contaminated the water treatment plants of Milwaukee. 403,000 people became seriously ill and 69 reportedly died due to the said parasite. Victims reported dehydration, fever, stomach cramps, and diarrhea. To date, this bacteria remains an annual concern. Although predominantly waterborne, it also spreads through soil, food, water, or even through fecal contamination.
H1N1 version 2009. The virus is now known as the “swine flu” was again reported in the United States and all over the world. There were about 60.8 million reported cases with around 274,304 hospitalizations and 12,469 deaths just in the United States alone. Worldwide, it affects mostly individuals less than 65 years old. The vaccine was finally made available in December 2009. This in effect reduced serious cases significantly.
Whooping Cough or Pertussis was reported in the US around 2010 and 2014. It is characterized by coughs which could last for months. It is considered to be life-threatening particularly for infants who are too young to be given vaccines. About 10 infants already died in the early days of the outbreak.
One of the most, if not the most controversial outbreak at this time is AIDS/HIV. It was first reported in 1981 initially as a rare lung infection. Later it was found to damage the body’s immune system leaving it weak to fight even the simplest infection. It is transmitted either sexually or through blood transfusion. It can also be passed on from mother to unborn child, if untreated. It is also considered as one of the leading causes of death between people 25 to 34 years old. To date, no vaccine or medicine is yet to be developed to cure AIDS. On the other hand, there are medicines that can be used to keep the HIV virus from developing further to AIDS.
COVID-19. Perhaps the most controversial of all pandemics listed here is COVID-19. The first case was reported in Wuhan City, Hubei Province China by the last quarter of 2019. It has since resulted in an almost global shutdown due to the high incidents of infection. Technically, this global pandemic has compromised the economy of almost all countries in the world. The world was caught unprepared. There was no vaccine nor medicine. The virus closed down almost all borders which resulted in a quarantine mechanism in many areas in the world.
As of July 5, 202 the current record shows that worldwide, there were about 11.2M confirmed cases, 6.03M recovered cases and 528K deaths. The United States currently has a record of 2.89M confirmed cases, 872Krecovery, and 132K deaths. To date, vaccines are still being tested for viability although a lot has been claiming of certain vaccines ready for mass production already. Until everything is up already, can we say COVID 19 is really done for.
Addressing the Need of Employees and Employees During COVID19
The United States has a proven track record of caring for the interest of its citizens. This is not the first time she will be facing an epidemic or pandemic, unfortunately, it's totally different from COVID-19.
Many companies are forced to furlough workers or close down their business to minimize further losses. Can their workers’ compensation coverage really fill in the gap for their losses?
The Current Situation
Many industries are now forced to classify their business between essential and non-essential. Businesses classified as non-essentials including leisure and tourism are forced to halt operation due to the virus. With both airlines and luxury liner operations on halt, there are simply no visitors to attend to. Some employees are able to go back to their job while working from home, and they are blessed few. There are those who had to go back to the front lines to do their jobs. They are the essential workers and are very much at risk of getting infected by the virus themselves
Workers' compensation insurance systems are designed to cover such. The basic provision of this insurance is designed to provide coverage and benefits for any illness or injuries resulting from their employment. It is effective as long as their employers paid their premiums.
Can the system continue to operate under these circumstances? This pandemic is considered an emergency situation. Legislations are currently addressed to meet this need amidst COVID-19 already. This is to maintain a balance between the interests of businesses, their employees, their insurance premiums, and even the consumers’ welfare. It is very important to manage these expectations since workers’ compensation is not a government benefit program. It is social insurance shouldered mostly by employers.
Legal measures to address the need of both employers and employees are currently being drafted by legislators like those in California and Colorado. These conditions are especially being considered because of the essential workers who might have a claim due to their exposure to the virus:
- Presumed to have arisen out of and in the course of employment; and
- A compensable accident, injury, or occupational disease.
On the hindsight, using this mechanism may result in these consequences:
- Higher Insurance Premiums. Workers’ compensation insurance is already expensive in many states. This may prompt “insurance carriers to adjust the costs of their policies.” The cost of workers’ compensation coverage will almost certainly increase to account for a payout of benefits on covered COVID-19-related claims.
- Overloading Existing State Program. Some states have their own unemployment insurance systems which they use to provide assistance to employees through enhanced unemployment insurance benefits. This is coverage for potential loss of income. Due to the current situation, however, this remains to be seen.
- Discouraging Businesses From Allowing Employees to Return to Work. As in many states, many essential business’ employees remain working even with the threat of pandemic around. With the possibility of opening non-essential businesses, the risk of employees getting infected is also high. However, coverage may not apply to those working from home. This may discourage business owners from opening soon.
- Protection In Civil Lawsuits. Similar to other cases, COVID-19-related claims coursed through the workers’ compensation may continue to protect employers against employee civil lawsuits. Simply put, an employee who gets his claim from the said policy cannot sue his employer further for civil damages due to COVID-19.
Getting Workers Compensation Insurance is a good investment and protection for the part of the employer. It will work for him in two ways. One, he will be able to provide coverage for his staff; two, he will also be able to protect his business. For this part, the employer is protected from further financial loss in his business when a claim is necessary. In this time of the COVID-19 pandemic, certain adjustments need to be made especially for the frontliners or “essential” workers and employees. However, they can still make adjustments on the coverage should the business need to go back to operation, and should they not be considered essential. The threat of getting infected is still there. Even without the adjustments on legislation, there’s always a workaround.
One good way to start is to compare our own company’s coverage for workers’ compensation in Denver, CO, or any other US State for a start. We can help you design your own coverage based on your need. Call us today and start protecting your business and your team.
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