Worker’s Compensation


In the early part of the 20th century, when an employee was injured on the job they had to bring a lawsuit against their employer in order to receive benefits for medical expenses and lost wages.  Employers would use several defenses in order to escape paying benefits to the injured worker.  This included:

Suing their employer to receive benefits was difficult and time consuming and often did not result in securing benefits for the injured worker.

Around this time, the general public became aware of the dangerous and sometimes unsanitary working conditions of the common man in industrial society.  Pressure was put on legislators to develop a more just system for dealing with workplace injuries.  In 1911 Wisconsin was the first state to implement a comprehensive workers compensation law and other states quickly followed suit.

Workers Compensation is the “sole remedy” for workplace injuries.  This means that in exchange for no fault guaranteed benefits for workplace injuries, workers give up their right to sue their employer for workplace injuries.

The Workers Compensation Policy

In order to fulfil their legal obligation to provide benefits for medical expenses and lost wages, employers purchase a Workers Compensation and Employers Liability policy.  The Workers Compensation and Employers Liability Policy consists of three parts:

1. Part one provides the statutory benefits as required by state law for medical expense and lost wages

2. Part two provides employers liability coverage. This is coverage for losses that arise out of the employment relationship but that do not fit into the statute. Part three is divided into sections 3A, 3B, and 3C

  • 3A lists the states in which the insured conducts operations
  • 3B lists the limits selected for Employers Liability
  • 3C lists other states in which there is a possibility of incidental operations

The Workers Compensation Policy

The National Council on Compensation Insurance or a state specific rating entity promulgates the Experience Modification factor on an annual basis.  This is a factor that is developed using the historical payrolls and losses for your organization over a three year period.  For every dollar in payroll in a given classification, there is an expected loss.  When actual losses are lower than expected losses, the Experience Modification Factor is expressed as a number less than 1.0.  When actual losses are higher than expected loss, the Experience Modification Factor is above 1.0.

Your manual premium will be multiplied by the Experience Modification Factor for your organization to arrive at your final premium.  A lower Experience Modification Factor will result in lower premiums whereas a higher Experience Modification Factor will result in higher premiums.

Risk Management

Achieving the lowest possible Experience Modification Factor is the objective of many organizations as it allows them to increase profitability by spending less on their Workers Compensation Insurance.  This can be achieved through the implementation of Risk Management Programs including:

The Risk Management professionals at Hardenbergh Insurance Group can help you to identify your lowest possible Experience Modification Factor.  We can then work with your team to implement the above referenced Risk Management techniques to get you to your lowest possible Experience Modification Factor.

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