Archive for the ‘Workers’ Compensation’ Category

Insurance Policies Needed by Sports Organizations

The minimum needed for maximum benefit

Because many sports organizations are run by volunteers, they are often under-insured. Insufficient insurance coverage may be a by-product of money-saving efforts or simply a matter of not understanding the risks of exposure to the athletes, coaches, staff and volunteers, and board members

Below is a list of the most important insurance policies that may be needed by community-based sports organizations such as teams, leagues, and municipal recreation departments.
  1. Accident: Pays medical bills on behalf of injured participants such as players and staff.
  2.  General Liability: responds to lawsuits arising from bodily injury, property damage, personal/advertising injury.
  3. Directors & Officers Liability (AKA Trustees Errors & Omissions for municipal recreation departments): Responds to certain lawsuitSports orginizationss not covered by General Liability such as discrimination, wrongful suspension or termination, failure to follow your own rules or bylaws, and violation of rights of others under state, federal, or constitutional law.
  4. Property/Equipment: Covers your buildings, equipment, and contents against loss due to fire, vandalism, theft, etc.
  5. Crime: Covers employee or volunteer embezzlement of funds or theft of property; forgery or alteration of checks by outsiders, and theft of money and securities by outsiders.
  6. Workers’ Compensation: May be required by state law if three or more employees and pays benefits to injured workers for “on the job” injuries including medical bills, lost wages, disability lump sums, disfigurement lump sums, and death benefits.
  7. Business Auto: Covers liability and physical damage to owned, non owned, and hired autos.
  8. Consult with your insurance agent about other types of policies such as Liquor Liability, Cyber Liability, Media, etc.

We provide more detailed information on each of these policy types and insider tips on purchasing insurance in our article, 7 Critical Mistakes to Avoid When Buying Sports Insurance. If you have questions or want assistance in deciding which policies your organization needs, call us at (800) 622-7370.

Copyright 2002-20014, Sadler & Company, Inc.

Do Leagues Need Workers’ Compensation Insurance?

The important question you need to ask and we help answer

Are sports organizations required to carry Workers’ Compensation insurance when workers are paid? This is a complex issue with some gray areas. Making matters worse for administrators is the fact that consequences can be severe for organizations that don’t have coverage if an injured worker can successfully argue that they are entitled to Workers’ Compensation benefits.

Workers' comp

Injured worker list

Most sports organizations such as teams and leagues are run by volunteers, but pay individual workers or businesses for services such as umpiring, janitorial, concessions, field maintenance, etc. And if these sports organizations win a bid to host a large tournament, the number of workers increases. These hired workers are, of course, considered independent contractors, not employees, for tax purposes.

Sports organizations typically purchase Accident and General Liability insurance but not Workers’ Compensation. The Accident policy usually covers all players, coaches, umpires, scorekeepers, and other staff, paying for medical expenses (ranging from $25,000 to $250,000 depending on the limits selected) not covered by family health insurance. The Accident policy is meant to cover volunteers and other paid workers who don’t come under the Workers’ Compensation Act.

I am basing the information below on South Carolina law and my understanding of the South Carolina Worker’s Compensation Act as it pertains to sports leagues. Other states have similar laws, but slight variations that occur from state to state can make a difference, and several states have enacted laws that exempt sports leagues from carrying Workers’ Compensation.

Liability for injuries to unpaid workers

  • Workers who are not paid are considered to be gratuitous workers. Their injuries are not compensable under the Workers’ Compensation Act.
  • Workers whose compensation is considered to be expense reimbursement (ex: some umpires) are likely considered to be gratuitous workers.
  • Injured gratuitous workers can file for Accident insurance benefits if such a policy exists.  They can also file a lawsuit against the sports organization based on negligence. Such lawsuits may be covered by a General Liability policy unless a specific exclusion applies to deny coverage.

Liability or injuries to paid employees

  • Just because a sports organization classifies a paid worker as an independent contractor does not mean that the Workers’ Compensation commissioner will agree with such classification. This is true even if there is a contract in place that states the worker is an independent contractor. In these cases, the injured worker almost always claims to be an employee instead of an independent contractor. The commissioner will apply a test based on case law and will look at about 20 different factors. Commissioners are typically sympathetic to injured workers and will go to great lengths to find that they are employees and their injuries compensable under the Workers’ Compensation Act as a result.
  • Sports organizations are exempt from carrying Workers’ Compensation if they regularly employ less than four employees within the state or had a total annual payroll of less than $3000 during the previous year, regardless of the numbers of people employed during that period.

Liability for injuries to subcontractor workers

  • The terms independent contractor and subcontractor are interchangeable for Workers’ Compensation purposes.
  • Sports organizations hiring subcontractors to perform or execute work that is part of the “trade, business, or occupation” of the sports organization are liable for injuries to the workers of such subcontractors, just as if they were employees of the sports organization.
  • Injures to a subcontractor worker who is a sole proprietor, partner, or LLC owner of the subcontractor business are notworkers' comp cartoon compensable under the Work Comp Act. However, these workers will usually claim that they are employees instead of subcontractors.
  • If the subcontractor carries its own Workers’ Compensation policy, such policy will pay benefits to the injured workers. That being said, it’s imperative to require the subcontractor to provide a certificate of insurance as evidence of Workers’ Compensation before they are hired.

Liability and penalties for failure to carry required Workers’ Compensation

If an employee or worker of a subcontractor suffers an injury that is covered under the Act and they seek Workers’ Compensation benefits from a sports organization that was required to carry Workers’ Compensation but failed to do so, the consequences can be severe.

  • Penalties can be assessed against the sports organization to make up for past Workers’ Compensation premiums that should have been paid.
  • The injured worker can file for Workers’ Compensation benefits against the state Uninsured Employers Fund, which results in a lien being placed against the sports organization in an amount that is equal to the benefits paid. This can result in insolvency for the sports organization since the total benefits can be extremely large depending on the seriousness of the injury. Workers’ Compensation may include past and future medical bills, lost wages based on 66.66% of the worker’s average weekly wage for up to 500 weeks paid in a lump sum for a disability, disfigurement, or death benefit.

If you have questions or want to inquire about receiving a Workers’ Compensation proposal, please call Sadler Sports & Recreation Insurance at 800-622-7370. You’ll be asked to provide information about the types of work and annual projected payroll of your workers.

DISCLAIMER: THIS ANALYSIS IS NOT MEANT TO PROVIDE SPECIFIC INSURANCE OR LEGAL ADVICE TO ANY SPORTS ORGANIZATION IN SOUTH CAROLINA OR ANY OTHER STATE. SPORTS ORGANIZATIONS MUST SEEK ADVICE FROM THEIR INSURANCE AGENT AND LEGAL COUNSEL BASED ON THEIR OWN UNIQUE FACTS AND CIRCUMSTANCES.

 

Workers’ Comp Abuse by Pro Athletes

California moves to close loophole

California is home to a bevy of professional sports organizations. Whether you’re watching the Warriors in the NBA playoffs or cheering on the San Francisco 49ers toward another divisional title, Californians are proud supporters of their players and teams.  But did you know that athletes not based in the state of California are eligible to file workers’ comp claims should they suffer an injury while participating in a sporting event in the state?

Insurers may be on the hook for more than $1.5 billion in potential Workers’ Compensation claims filed by out-of-state athletes, according to Milliman Inc., a Seattle-based actuarial and consulting firm.  Assembly Bill 1309 seeks to amend the California labor code in an attempt to offset these losses, saving California tax payers money.

California’s “Cumulative Trauma” Workers’ Compensation provision for professional athletes

In its current form, the California labor code provides that any injury defined as “cumulative” or occurring as repetitive mental and physical trauma with the combined effect of disability or the need for medical treatment may be covered by the state’s Workers Compensation provision.  It does not require that professional athletes covered by the law be employed by a California based organization.  Rather, the injury needs only to have occurred while in the state for the claimant to receive benefits.

The California Insurance Guarantee Association pays for insolvent insurers and is funded by assessments on California employers.  The Milliman report alleges that CIGA has processed 1700 Workers’ Comp claims from players residing out-of-state, prompting speculation that guarantee fund assessments paid out by Californian employers will soon be on the rise.

Out-of-state athlete abuse

The statute of limitations to file a Workers’ Comp claim does not begin until an employee has been informed of their right to file and is valid for one year.  Retired players suffering neurological and cognitive disorders as a result of their professional affiliations are the most likely to benefit from this loophole.  Milliman estimates that claims by athletes having played professionally in California within the last 30 years could reach $1.57 billion with $825 million coming from retired players who have not yet filed claims. Approximately $1.23 billion or 78% of these claims are likely to come from out-of-state.

Assembly Bill 1309 would ban professional athletes and their dependents from receiving California Workers’ Comp benefits if the athlete was hired by an organization outside of the state.  This includes minor/major league baseball, basketball, football, hockey and soccer.

Source:  California Looks To Stem Pro Athletes’ Comp Claims; Sheena Harrison; Business Insurance: April 22, 2013.

Workers’ Compensation for Sports/Recreation Organizations

Understanding what’s required and why

Workers’ Compensation is an important but often overlooked insurance policy for sports and recreation organizations. Many smaller organizations attempt to only carry Accident insurance when Workers’ Compensation may be required by state law. Workers’ Compensation tends to be more expensive, more difficult to administer, and less readily available from the private marketplace as compared to Accident insurance.

This article will explain the requirement to carry Worker’s Comp, the benefits it provides, what premiums are based upon, and how to properly set up a policy.

Is your organization required to carry Workers’ Compensation?

It can be difficult to determine if a particular sports or recreation organization is requiredWorker's Comp for Sports Organizations to carry Workers’ Compensation as state laws vary. Typically, most states require an organization to carry Work Comp if they regularly employ three or more employees, though it may be two or more or four or more in some states. The legal definition of employee includes officers and may also include workmen of subcontractors. Things are further complicated by various exemptions from the employee count if compensation is below a certain level. Some states have laws exempting certain sports league workers.

The best way to determine if Worker’s Comp is required is by contacting your state’s Workers’ Compensation commission. Our article Do Leagues Need Workers’ Compensation Insurance? may also offer some clarity.

One thing is certain in every state: if your organization is required to carry Worker’s Comp and fails to do so, and if a worker is injured, the penalties and liabilities can be severe. Most states have an uninsured employers fund that will pay the normal benefits on behalf of an injured worker whose employer failed to carry Worker’s Comp. After paying the benefits, the fund places a lien equal to the amount of benefits paid against the non-complying organization, which can easily result in bankruptcy.

Workers’ Compensation policies consist of two coverage parts

Part One: Statutory Workers’ Compensation 

This pays the benefits to injured workers in accordance with the controlling state’s Workers’ Compensation Act. State Workers’ Compensation laws were developed to provide efficient compensation to injured workers and to protect employers against lawsuits. As a result, Workers’ Compensation is a no-fault system that pays without regard to negligence or wrongdoing on the part of the employer.

Below are the benefits Workers’ Compensation insurance pays to employees or employees of uninsured subcontractors who suffer occupational injuries or diseases while “on the job” and “in the course of employment.” Benefits vary from state-to-state.

  • 100% of past and future medical bills
  • Rehabilitation expenses
  • Weekly lost wages based on a formula (usually 66.6% of average weekly wages for the prior year) for a predetermined number of weeks subject to a waiting period and a minimum and maximum payroll amount
  • Lump sum awards for disabilities
  • Lump sum awards for disfigurements
  • Death benefits to dependents
Part Two: Employers Liability

Employers Liability responds to legal liability from occupational injuries and diseases to employees where recovery is allowed by law. Such claims are somewhat rare, but injured workers and third parties can sometimes file lawsuits to trigger coverage under Employers Liability. Examples of such lawsuits include loss of companionship by spouse, loss of household services by a family member, dual capacity lawsuits, third-party-action-over, and consequential bodily injury.

Operations in multiple states

Workers’ Compensation policies should be customized to account for multi-state operations since each state has its own Workers’ Compensation Act with unique requirements and benefits. Failure to properly set up the policy can result in uncovered claims. Unfortunately, it can be difficult to find a single insurance carrier that is licensed in all states, which can result in a hodgepodge of separate insurance policies and administrative hassle of separate billings and policy audits.

It is important to properly list all states with both known and unknown exposure under sections 3A and 3C of the policy. Otherwise, coverage in a particular state will not be triggered. This can be a problem since injured employees and their attorneys “forum shop” to bring their claim for Workers’ Compensation in the state that will have the highest level of benefits. The various state Workers’ Compensation acts may allow choice of state between state of hire, state of residence, state of primary employment, state of pay, state of injury, or state in agreement between employer and employee. For example, assume that the claimant has a choice between filing for benefits in the states of SC and VA and that the VA benefits are $20,000 greater and that VA was not properly added as a covered state. In this scenario, it is possible that the Workers’ Compensation carrier would pay benefits up to the SC level but the insured sports organization would be responsible to pay the remaining $20,000 out of pocket.

Section 3A (Known State Exposure): Section 3A of the policy triggers coverage for each state where the insured “knows” that an employee or uninsured sub will be working as of the effective date of the policy. The definition of “known work” is subject to varying interpretations. Some insurance experts advise that 3A should be limited to states where an employee is domiciled or where there is an existing contract for work as of the effective date. These experts don’t see the need to list states through which salesmen will be traveling or in which executives will be attending trade shows. However, other experts and some state Departments of Insurance would advise listing all states within which employees have even minimal contact under Section 3A.

Section 3C (Unknown State Exposure): Section 3C of the policy triggers coverage for states in which the insured is not aware of potential exposure as of the effective date of the policy. This section should included all states except those listed in Section 3A and the monopolistic states. It is important to note that Section 3C will not provide benefits for any state which should have been listed as a Section 3A state. The insurance carrier should be notified immediately if work begins in a 3C state after the effective date of the policy.

Monopolistic States: Sports organizations with worker exposure in the monopolistic states of ND, OH, WA, and WY must purchase Workers’ Compensation coverage directly from the respective state fund. Coverage for these states can’t be purchased through the private insurance marketplace. Since Employers Liability coverage is not available through the monopolistic state funds, a coverage known as “Stop Gap Employers Liability” should be endorsed onto either a private marketplace Workers’ Compensation policy or the General Liability policy.

Federal compensation laws

Some sports organization may have operations that fall under various federal compensation benefit laws that are not covered by the standard Workers’ Compensation policy form. If such exposure exists, it must be endorsed onto the existing Workers’ Compensation policy or a stand-alone policy must be purchased. Failure to address these federal exposures can create large uninsured liabilities as the benefits owed under these federal laws tend to be much higher than those under state Workers’ Compensation.

Examples of federal benefit laws creating liability include U.S. Longshoremen and Harbor Act (operations over navigable waters), Jones Act (seamen on vessels), and Foreign Defense Base Act. The USL&H and the Jones Acts may apply to certain water-based sports organizations.

How a Workers’ Compensation premium is determined

A Workers’ Compensation premium is based on a rate per $100 of projected payroll per classification code. Various types of classification codes are available for different types of workers such as clerical, sales, coaches, athletes, camp instructors, umpires, gate, concession, and field maintenance workers. Strict classification rules are set by the National Council on Compensation Insurance or the state equivalent. Each classification is assigned a different rate in each state depending on the statistical risk of injury. Rates can be further adjusted by a rating factor called an experience modification that is promulgated by NCCI (or state equivalent) that rewards or penalizes an insured based on their past safety and loss record. At the end of the policy year, an audit is performed to determine the actual payrolls and the premium is adjusted.

Sports risks are perceived as high risk

Insurance carriers that write Workers’ Compensation insurance may perceive sports and recreation organizations as high-risk business and often are not willing to voluntarily write this coverage. As a result, many end up being placed in state assigned risk pools that result in higher rates and less flexibility to add needed states of coverage. Of particular concern to insurance carriers are sports organizations with employee exposure in the areas of professional athletes, coaches, and umpires and the rates for these classes can be shockingly expensive and can vary greatly from one state to the next. On the other hand, organizations with employee exposure limited to the areas of clerical, officer travel, and event management are not considered to be high risk.

Get a quote

Contact Sadler Sports & Recreation Insurance at (800) 622-7370 to inquire about receiving a Workers’ Compensation proposal. We will ask you to provide information about the types of work and annual projected payrolls of your various types of workers.

 

NFL’s Defense in Concussion Lawsuits

Will NFL use Workers’ Compensation as an exclusive remedy?

More than 20 lawsuits name the NFL as a defendant alleging the league negligently misled hundreds of former players about the dangers of concussions and other head injuries.  The league’s official provider of helmets, Riddell Inc., is  a defendant in some of the suits.

The NFL will probably argue that players who suffered concussions should be covered solely by provisions of the league’s collective bargaining agreement, according to Michael McGlamry, an attorney representing many of the players. Those provisions include workers compensation, disability benefits and the NFL‘s 88 Plan, which covers medical and custodial care of retired NFL players with dementia.

Source: Business Insurance, January 30, 2012

Cumulative Concussions and California Workers’ Compensation

Worker's Compensation InsuranceUnder California’s liberal Workers’ Compensation code, NFL players from any franchise can file claims for cumulative trauma injury, even if they merely played a single game or practiced in the state. Workers’ Comp attorneys representing players from the 1960s to the present are forum shopping these claims to the tune of $150,000 to $200,000 per claim. Since 2008, 1600 claims have been filed in California at a cost of $375 million. The projected cost is expected to exceed $1 billion.

These cumulative trauma concussion claims will cost NFL teams dearly on their Workers’ Compensation premiums thanks to California. Other states don’t cover cumulative trauma claims under their Workers’ Compensation codes.

Source: Risk & Insurance, Nov. 2010