WORKERS COMPENSATION- GENERAL
CONCEPTS Exam Questions And Answers
Workers compensation rating is developed by applying a rating bureau job classification rate to
each
A $500 of payroll.
B $1,000 of payroll.
C $100 of payroll.
D $250 of payroll. - ANS C $100 of payroll.
correct! Workers compensation rating is developed by applying a rating bureau job classification
rate to each $100 of payroll.
Job Classification - Payroll and Rates
Workers compensation rating is developed by applying a rating bureau job classification rate to
each $100 of payroll. Estimated payroll figures are used when a policy is issued, and the final
premium is determined by an audit. Payroll means remuneration. It includes salaries, wages,
commissions, bonuses, noncash compensation, vacation pay, and sick leave pay.
All of the following choices are legal methods for employers to finance their liability for Workers
Compensation benefits in California EXCEPT
A State insurance.
B Employee insurance.
C Self-insurance.
D Private insurance. - ANS B Employee insurance.
correct! Self-insurance, private insurance and state insurance are all legal methods by which
employers may finance their liability for Workers Compensation benefits.
Coverage Provided
California has a compulsory workers compensation law. Simply put, even if there is only one
employee on a person's payroll, workers compensation benefits must be provided. All
employers are required to obtain a workers compensation insurance policy unless they are large
enough to demonstrate stable cash flow, in which case they may apply to the state Department
of Industrial Relations (DIR) and, if qualified, be certified as self-insured for workers
compensation. Most such employers are also required to post securities - a surety bond or other
cash deposit which could be used to pay claims if the employer fails to do so - with the state for
,the privilege of being self-insured. As with any health insurance, employers may finance their
liability for Workers Compensation benefits through state, private, or self insurance.
An employer who fails to obtain the required insurance can have his or her business temporarily
closed by a stop order of the Department of Industrial Relations. Additionally, the employer may
be fined up to $10,000 for violating the stop order, in addition to $1,000 per employee and the
possibility of being charged with insurance fraud because of failure to purchase workers
compensation insurance. California has an uninsured employee fund for the purpose of handing
the claims of uninsured workers.
Temporary total disability benefit payments are usually two-thirds (66.67%) of the wages that the
insured was earning before the injury. However, the insured cannot receive more than a
maximum weekly amount set by law (currently $1,066.72 per week, but the dollar amounts
increase annually to reflect gro
An employer is on the verge of bankruptcy. To save money, the employer decides to cancel its
workers compensation plan. Which of the following is true?
A The business is not required to maintain workers compensation insurance, provided that the
employees are notified 90 days before policy cancellation.
B If the business meets the state's definition of small employer, then workers compensation is
coverage is not necessary anyway.
C This business may be closed under a cease and desist order issued by the Department of
Industrial Relations.
D Assuming that the business really is on the verge of bankruptcy, it could appeal to the State
Insurance Department for exempt status. - ANS C This business may be closed under a
cease and desist order issued by the Department of Industrial Relations.
Correct! All employers must obtain workers compensation insurance. Failure to do so may result
in a cease and desist order from the Department of Industrial Relations.
California State Compensation Insurance Fund
In California, the state operates the State Compensation Insurance Fund (State Fund or SCIF),
but there is also open competition for workers compensation insurance among a number of
commercial insurers. The SCIF is now expected to be the insurer of last resort. Large employers
that have the financial ability to pay premiums are being turned away or even requested to
withdraw from SCIF, unless they can show that they are unable to obtain coverage in the
commercial marketplace. Priority is now being given to smaller employers with more limited
payrolls, regardless of whether they have sought coverage in the open market.
The SCIF's Board of Directors establishes the rates charged by the Fund for the insurance it
issues. These rates must be fixed within each class of business taking into consideration
occupational hazards and in accordance with the elements listed below:
, Bodily risk or safety, premises or work hazard for each insured employer;
The manner in which the work is conducted;
A reasonable regard for the accident experience of each insured;
A reasonable regard for the means and methods of caring for injured persons by each insured.
Note, however, that the rates shall not take into account the extent to which the employees have
or do not have persons dependent upon them for support.
Very small employers are no longer required to prove that at least three insurers have declined
them for coverage. Also, certain employers are regulated under the U.S. Longshoremens and
Harbor Workers Compensatio
According to the standard workers compensation and employer liability policy form, a state
should be listed in Part Three - other states' insurance of the workers compensation and
employers liability policy when
A The insurer is not licensed to write workers compensation in that state.
B The state has a monopolistic workers compensation fund.
C The insured expects to extend operations to that state.
D The insured has operations in the state when the policy is written. - ANS C The insured
expects to extend operations to that state.
correct! By naming a state in Part Three of a workers compensation and employer liability
(WC&EL) policy, an employer provides that company operations may be conducted in that state.
The state in which a temporary or new operation exists must be listed in the 3C part of the
information page. It is common for this section to list or describe all states other than
monopolistic states. This offers the insured the greatest protection for incidental or new
exposures. If the state is not listed, no coverage applies.
A critical component to this coverage is when the work began. If it is after the effective date of
the policy and the insured has made no other arrangements for coverage (self-insurance), then
coverage applies as if the state were listed in 3A - mandatory coverage. However, if work is
underway on the effective date, coverage will only apply if the insurer is notified within 30 days.
For example, an insured has a calendar year policy and begins work in June in a new state. The
state in which work is conducted is not listed in 3A of the information page. As long as this state
is listed in 3C, coverage will apply as if it were listed in 3A. In policy period 2 of the following
year, the insured's work continues. An injury occurs in March of the second policy term. The
insured, in order to have coverage, would have had to notify the insurer by the end of January of
policy period 2. If they did, the state would be listed in 3A, and coverage would apply. If the
insured did not notify the insurer there would be no coverage even if the state continued to be
listed in 3C.
