What is Workers’ Compensation Insurance for building design professionals?

Workers’ Compensation Insurance, commonly known as Workers’ Comp, is a form of liability insurance that provides funds for employees who suffer work-related injuries or illnesses. Workers’ Comp helps to cover medical expenses and lost wages associated with these injuries.

Example:

• One of the civil engineers at your firm is working overnight in a poorly lit underground tunnel when he slips and falls on wet ground. He is treated at the hospital for a broken leg and stays at home for eight weeks to recover. Workers’ Compensation will pay for his medical expenses and lost wages.

In exchange for accepting Workers’ Compensation benefits, an injured employee agrees not to sue your business for the injury. Workers’ Compensation Insurance is no-fault, which means that it pays benefits regardless of whether the employer or employee is at fault for the injury.

What does Workers’ Compensation Insurance for building design professionals cover?

Workers’ Compensation Insurance covers employees at your building design firm, which includes workers who are not U.S. citizens as well as minors, who suffer a work-related injury or illness.

A work-related injury is an injury that is related to a worker’s job duties, which includes most injuries that occur while an employee is working. The range of injuries and illnesses covered is broad and may include accidents from slipping and falling at your own offices to exposure to toxic chemicals on a job site. Each state regulates the kinds of illnesses or injuries that Workers’ Compensation Insurance covers, so coverage may vary from state to state.

Injuries that occur on a job site, client site, or outside of your office are covered. Injuries that occur while traveling for work reasons, such as driving from the office to a client site or driving between work sites are also covered, even if driving a personal vehicle.

Note that there are illnesses or injuries where coverage is not required by the states. For these illnesses or injuries, employees may still sue your company. Workers’ Compensation Insurance will cover legal defense costs and damages from these illnesses or injuries which are not defined in state workers’ compensation regulations. This coverage is also known as employers’ liability insurance, and is often referred to as “Part 2” or “Part B” of Workers’ Compensation Insurance.

What are the key exclusions of Workers’ Compensation Insurance for building design professionals?

Injuries suffered in the following situations would not be covered by Workers’ Compensation:

• Injuries while commuting to and from work
• Drug or alcohol-related injuries
• Injuries sustained while not at work
• Fights or violence initiated by the employee
• Injuries that are purposefully self-inflicted
• Horseplay or violations of company policy

Example:

• One of the architects at your firm is back from a weekend trip to a music festival and seems out of sorts. When he has an accident at a building site, your firm requires him to take a drug test. Because he tests positive for illegal narcotics in his bloodstream, Workers’ Compensation will not cover him.

What does Workers’ Compensation Insurance for building design professionals pay for?

Injury

In the event of injury at work, Worker’s Compensation will pay for:

• Medical expenses as a result of the injury
• Rehabilitation and physical therapy costs
• A portion of lost wages (usually around two-thirds, but it varies by state) during the time the employee is unable to work
• The amount of income replacement offered by Workers’ Compensation depends upon whether the employee’s impairment is total or partial, and whether it is temporary or permanent.

Example:

• A transportation engineer at your company is surveying a freeway junction he will be redesigning when he gets hit by a car. His back injuries render him unable to stand, but he is still able to carry out the functions of a desk job that involves no travel to work sites. His doctor uses the state guidelines to determine he has a partial permanent disability.

Most states require that benefits be paid for the duration of the disability. Some states specify a maximum number of weeks for the lost wages to be paid, especially for temporary disabilities.

Death

In the event of death at work, Workers’ Compensation Insurance will pay for:

• Funeral costs
• Death benefits for surviving close relatives, such as a spouse or children

Death benefits for surviving relatives are based upon an employee’s weekly wages. The benefit is a portion (commonly two-thirds but it varies by state) of the worker’s wage at the time of death. Rules vary by state, but for a surviving spouse, the benefit may be paid until their own death or remarriage. For children, the benefits may be paid until the children reach age 18.

Is Workers’ Compensation Insurance required for building design professionals?

Workers’ Compensation insurance requirements vary by state. In most, coverage is not required until a business has employees who are not owners or partners in the business.

As a building design firm, you may find that many of your potential clients will require that you are covered by Workers’ Compensation Insurance. If your business hires contractors, you should require proof of Workers’ Compensation Insurance from all of your subcontractors in order to avoid any unintended liability. You may be legally liable for the injuries of your contractors if they are injured while doing work for your company.

Example:

• Your architectural firm hires an architect who is a contractor to design a residential home. When he is on the construction site, he is accidentally injured by a construction worker wielding a power tool. The contractor sues your company for his bodily injury and medical expenses. If your firm had insured him with Workers’ Compensation, or if he carried his own Workers’ Compensation Insurance, his medical expenses would have been covered by Workers’ Compensation, and he wouldn’t be able to file a lawsuit.

How do states regulate Workers’ Compensation Insurance?

Workers’ Compensation Insurance is regulated by each individual state, and each state has slightly different regulations and requirements for employers and insurance companies. The states determine:

• Benefit amounts for each employee
• Which illnesses and injuries are covered
• Diagnostic tests for impairments and injuries
• Protocols for delivery of medical care

States also have different regulations for providers of Workers’ Compensation Insurance. States generally have one of three systems:

• Insurance provided solely by a state-run insurer
• Businesses can choose between insurance provided by a state-run insurer and private insurers
• All Workers’ Compensation insurers are private companies

How much does Workers’ Compensation Insurance cost for building design professionals?

Pricing for Workers’ Compensation Insurance is based upon a number of factors, including:

• Business location
• Number of employees
• Dollar amount of payroll
• Claims history
• Nature of the business, which is based on the industry classification code
  • Example: Architects and engineers are classified as 8601.

Workers’ Comp premiums are usually quoted as a rate per $100 of payroll, and the range of premiums varies widely. Generally speaking though, you can assume that lower risk industries and professions, such as an architect or engineer, will pay significantly less than higher risk professions, like a roofer or construction worker.

For all but the smallest businesses, insurance companies apply an adjustment to premiums called the experience rating. This rating is based on the claims history of a business compared with other businesses with the same industry classification. The higher your experience rating, the higher your workers’ compensation premiums will be.

The experience rating is weighted towards the frequency of claims over the severity of claims. Thus, if you have many smaller claims, you’ll have a higher experience rating than a company with only a single large claim. Insurance companies believe that a high number of small claims is a marker that a company will face larger claims in the future, so they raise premiums for businesses with many claims.

The best way to control your workers’ compensation costs is to create a work environment that is safe for your employees. By reducing workplace safety risks, you’ll reduce the number of workers’ compensation claims and also reduce your premiums.

Final Word

Workers’ Compensation covers the medical expenses and lost wages of employees who have been injured or fallen ill on the job, no matter who was at fault. Pricing for Workers’ Compensation depends on the business location, number of employees, dollar amount of payroll, claims history, and the nature of the business. Industries in which employees face more physical risks and hazards, such as construction, will pay a higher premium for Workers’ Compensation than architects, engineers, and other building design professionals that mainly work from a desk. Since building design professionals do face the typical hazards of business as well as hazards on visits to job sites, Workers’ Compensation will provide coverage for the risks of employee injuries that leave them unable to work.