(December 2020)
Domestic workers and agricultural workers are all eligible to be covered under workers compensation laws, but in most states that coverage is not mandatory. The employer of these workers may not realize the liability he or she has for these workers until after a serious accident actually occurs. States take different approaches to the issue, and how to provide coverage is not consistent. This article reviews some of the different approaches taken and attempts to provide some practical solutions.
The first and most important step in covering domestic employees and farm workers is being aware of the state laws that apply to them. There are three approaches:
When a worker is exempt or excluded from workers compensation mandatory coverage it does not mean that the employer is exempt from liability for injuries to that worker. The employer can be sued and found responsible, but without workers compensation coverage, the employer has no coverage with which to pay. This means that the employer’s assets must be used to pay for any injuries. However, the employer will not be subject to any fines for not having coverage.
Workers compensation laws in some states require that these employees be covered. Compulsory coverage applies to them the same as it does to other traditional classes of employees. This means that personal lines customers will need to purchase this coverage.
A few states take an approach that combines the two approaches above. In them, these employees are exempt or excluded until certain circumstances arise or criteria are met. Some examples are when the number of a specific type of employee exceeds a pre-set minimum, payroll for a class of these employees exceeds a pre-determined amount, or an employee is employed for longer than an established minimum period of time.
In states where workers compensation coverage for certain workers is not required or mandatory, the employer can cover them voluntarily. The appropriate coverage endorsement must be attached to its workers compensation and employers liability policy or the individual employer's homeowners, farmowners, ranchowners, or personal liability policy. Those policies or endorsements provide coverage for the previously exempted employees in the same way coverage is provided to other covered employees.
Two endorsements are available to add this voluntary coverage:
Related Article: Voluntary Compensation Insurance
When coverage for these types of employees is mandatory, there are two ways to provide the coverage:
Note: This method is available only for coverage to residence employees. It cannot be used to cover farm or any type of business employee. The first method is the only option for them.
The National Council on Compensation Insurance, Inc. (NCCI) has developed special rules, rates, and classification procedures for domestic workers. The NCCI Basic Manual for Workers Compensation and Employers Liability Insurance provides the following classifications:
These domestic workers classifications include work considered to be ordinary repair or maintenance of the insured employer’s residence or related structures and their equipment. However, if the only work performed is maintenance or repair work the proper classification is Code 9015, Buildings–Operation by Owner or Lessee or Real Estate Management Firm: All Other Employees These employees would not fit into the exempt or excluded category either which means they must be covered as any other type of business-related employee.
Neither the domestic worker classifications above nor Code 9015 contemplates extraordinary or unusual repairs and alterations, new construction, and demolition operations. If any of these operations take place, a more specific and appropriate commercial or business classification must be used.
The rate
for domestic employees is per employee not remuneration.
Does the homeowners policy cover domestic workers? The answer is both yes and no. In most cases, the unendorsed homeowners, farmowners, ranchowners, or personal liability policy provides only limited coverage.
The liability section of the homeowners policy may provide coverage, but only as long as state law does not require that the insured employer provide any mandatory compensation or disability benefits. Policy exclusions eliminate coverage either because the limited or very basic coverages in homeowners or other personal liability policies may not be broad enough to comply with state mandated benefits or simply to eliminate duplicate coverage.
Homeowners,
farmowners, ranchowners, or other personal liability policies can be endorsed
in states where coverage is compulsory or mandatory, as stated in the mandatory
coverages section above. WC 00 00 00 C–Workers Compensation and Employers
Liability Insurance Policy covers the exposure in other cases. Unendorsed homeowners, farmowners, ranchowners, or personal
liability policies do not apply to any employees other than domestic workers.
Other workers and classifications are considered business exposures.
All personal liability coverage forms extend medical payments
coverage to domestic workers, but the limits are usually low, in the range of
$1,000 to $10,000, and apply to only short-term medical and funeral expenses.
The problem gets really complicated when domestic workers
travel outside the state with their employer. Other states may require covering
all employees when employed in that state. If the other state accepts
jurisdiction of a claim for a domestic worker while at a secondary residence or
while traveling with an employer, the employer may face fines and/or a jail
term for not complying with the law. If the secondary residence or destination
involves a monopolistic state, the employer must know the specific requirements
that apply in that state.
A final issue to examine involves using only the unendorsed
homeowners, farmowners, ranchowners, or personal liability policy to cover
domestic workers. Even when the insured employer is not required to provide
workers compensation coverage, and the personal liability policy offers medical
payments coverage, the employer is still potentially liable for bodily injury
or disease to a domestic worker. The employer may be exposed to and be liable
for a large uninsured loss if the policy is not properly endorsed to provide
coverage.