Workers Compensation Practice Test (Part 1 of 2)

Correct answer: B. It does not bar or reduce benefits, since fault is not considered

Workers compensation is a no-fault system: the worker receives defined benefits without proving employer negligence, and ordinary employee carelessness does not reduce them. Comparative or contributory negligence is a tort concept and does not apply. Narrow statutory defenses, such as intoxication, vary by state. Workers compensation, not personal health insurance, is the primary payer for a compensable injury.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), The Grand Bargain; Medical Benefits

Correct answer: D. The employer's owner struck the employee intending to injure him

Exclusive remedy bars an employee's tort suit against the employer for a covered workplace injury, even when the employer was negligent. Many states recognize an exception for injuries the employer intentionally caused, though the required level of intent varies by state. A coworker's negligence was the old fellow-servant defense; under workers compensation it is simply a covered injury. Negligence by the employer, even serious negligence, generally stays within the system.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Exclusive Remedy

Correct answer: A. The dual capacity doctrine

The dual capacity doctrine treats the employer as a separate legal person when it injures an employee in a non-employer role, such as product manufacturer. Many states reject or limit it. Where such a suit is allowed, Part Two of WC 00 00 00 covers damages because of bodily injury to an employee claimed against the employer in a capacity other than as employer. The statutory employer rule instead makes a general contractor liable for an uninsured subcontractor's workers.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Two, B. We Will Pay, item 4; R&C analysis of WC 00 00 00 B

Correct answer: C. A causal link between the injury and a risk of the employment

The two elements test different things. Arising out of looks at origin: the injury must be causally connected to a risk or condition of the employment. In the course of looks at time, place, and circumstances: the worker was doing something related to the job when hurt. The option about work hours and premises describes the course element, not the arising out of element. Employer negligence is never required in a no-fault system.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Two, A.1 (arise out of and in the course of employment); Texas Labor Code 401.011(12) as an example definition

Correct answer: C. A sandblaster's silicosis after years of breathing silica dust at work

An occupational disease develops from exposure to conditions characteristic of the work, often over a long period, as silica dust does for a sandblaster. Ordinary diseases of life that the general public catches outside of work, such as the flu, are generally excluded. A sudden fall is bodily injury by accident, not disease. The heart attack at home lacks any connection to employment.

Reference: Texas Labor Code 401.011(34) as an example definition (excludes ordinary diseases of life); NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part One, A

Correct answer: A. Compensable, because the trip was a special errand made at the employer's direction

The going-and-coming rule generally excludes injuries during an ordinary commute to and from a fixed workplace. A widely recognized exception covers a special errand or mission the employer directs, because the trip itself is part of the job. Working hours alone do not control. Fault is irrelevant in a no-fault system, so Marcus does not need to prove the other driver caused the crash.

Reference: Texas Labor Code 401.011(12)(A)(iii) as an example of the employer-directed travel exception

Correct answer: D. The company sets Jun's hours and route and dictates his methods

Under the common-law test, the key question is whether the hiring business controls, or has the right to control, what is done and how it is done. Control over hours, routes, and methods points to employment. Owning tools, being paid by the job, and offering services to the public point toward independent contractor status. Some states also use other tests, such as relative nature of the work or economic reality.

Reference: IRS, Independent Contractor (Self-Employed) or Employee? Common law rules

Correct answer: C. BuildRight, as the statutory employer of Delgado's workers

Statutory employer laws make an upstream contractor liable for workers compensation benefits owed to employees of an uninsured subcontractor. That is why general contractors collect certificates of insurance. The standard policy reflects this: Part Five charges premium on payments to persons whose injuries could make the insurer liable under Part One unless the employer proves their employers secured coverage. Health insurance is not the primary payer for work injuries.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Five, C. Remuneration, item 2

Correct answer: B. North Dakota, Ohio, Washington, and Wyoming

Four states have monopolistic state funds: North Dakota, Ohio, Washington, and Wyoming. Private insurers cannot sell state workers compensation coverage there. Ohio and Washington allow qualified employers to self-insure, while North Dakota and Wyoming do not. The other groups are not monopolistic states; several of them, such as California, New York, Montana, and Oregon, have competitive state funds that sell alongside private insurers. West Virginia once had an exclusive fund but opened its market to private insurers.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), State Funds: Exclusive and Competitive; Self-Insurance; Table A-2

Correct answer: C. A state insurer that competes with private insurers and is often the insurer of last resort

A competitive state fund operates in an open market: employers may buy from it or from private insurers, and many such funds act as the insurer of last resort for employers that have trouble finding coverage. A fund that is the only legal source is a monopolistic (exclusive) fund. Paying your own claims after posting security is self-insurance. Paying the added cost of a combined disability describes a second injury fund.

Reference: Insurance Information Institute, Spotlight on Workers Compensation; Congressional Research Service, Workers' Compensation: Overview and Issues (R44580)

Correct answer: A. State approval of its financial strength, often with a bond or other security

Self-insurance lets an employer pay statutory benefits from its own resources instead of buying a policy, but the state must approve it, and the employer may have to post a bond or other security so benefits are paid even if it becomes insolvent. A self-insured employer still owes full statutory benefits; employees cannot waive them. Part One has no dollar limit. North Dakota and Wyoming do not allow self-insurance.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Self-Insurance

Correct answer: D. The employer pays for the second eye loss; the fund pays the added cost of total disability

A second injury fund pays the difference between what the employer owes for the new injury alone and the larger cost of the total disability that results when it combines with a pre-existing impairment. The goal is to remove a reason not to hire workers with disabilities. Without a fund, the employer could owe the entire total disability award. Many states have abolished or limited their funds.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Second Injury Funds

Correct answer: D. No dollar limit; it pays benefits required by the workers compensation law

Part One states that the insurer will pay promptly when due the benefits required of the employer by the workers compensation law of the states listed in Item 3.A. Because those benefits are set by statute, no dollar limit appears for Part One. The limits shown in Item 3.B. apply only to Part Two, Employers Liability. Premium has nothing to do with the amount of statutory benefits owed.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part One, B. We Will Pay; Information Page Items 3.A. and 3.B.

Correct answer: B. The most paid for all disease claims, regardless of the number of employees

The standard limits are $100,000 bodily injury by accident (each accident), $500,000 bodily injury by disease (policy limit), and $100,000 bodily injury by disease (each employee). The disease policy limit is the most the insurer pays for all disease damages under the policy, regardless of the number of employees. The each-employee disease limit caps any one worker. Part One statutory benefits have no stated limit.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Two, G. Limits of Liability; standard limits per NCCI Basic Manual as summarized by R&C

Correct answer: A. $100,000

The bodily injury by accident limit of $100,000 is the most the insurer will pay for all damages because of bodily injury to one or more employees in any one accident. One explosion is one accident, so the $150,000 in damages is capped at $100,000. The $500,000 and each-employee limits apply only to bodily injury by disease, and $300,000 wrongly applies the limit per employee.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Two, G.1 Bodily Injury by Accident

Correct answer: C. Part Two, which covers damages owed to a third party over an employee's injury

This is a third-party-over action. Part Two, Employers Liability, pays damages for which the employer is liable to a third party that is being sued because of injury to the employer's employee, where recovery is permitted by law. Part One pays only statutory benefits to the injured worker. Part Three extends coverage to other states. Exclusive remedy blocks the employee's own tort suit, but some states allow third-party contribution or indemnity claims.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Two, B. We Will Pay, item 1

Correct answer: A. A former employee's suit alleging harassment and wrongful termination

Part Two excludes damages arising out of coercion, criticism, demotion, discipline, defamation, harassment, humiliation, discrimination, termination, or other personnel practices. Those exposures belong under employment practices liability insurance. Part Two does cover, where the law permits, consequential bodily injury to a spouse, child, parent, brother, or sister; third-party-over claims; and claims against the employer in a capacity other than as employer.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Two, B. We Will Pay and C. Exclusions, item 7

Correct answer: D. The policy applies as though State B were listed in Item 3.A.

Part Three, Other States Insurance, applies to states listed in Item 3.C. If the employer begins work in one of those states after the policy's effective date and is not otherwise insured there, all policy provisions apply as though that state were listed in Item 3.A. Lakeside must tell the insurer at once. Advance approval is not required. Work already underway on the effective date in an unlisted state requires notice within 30 days.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Three, A. How This Insurance Applies and B. Notice

Correct answer: A. As the employer's own cost, since voluntary payments are at its own expense

Part Four requires the employer to tell the insurer at once if an injury occurs that may be covered and says not to voluntarily make payments, assume obligations, or incur expenses, except at the employer's own cost. The owner's private settlement is therefore not reimbursable. The owner also breached the duty of prompt notice. Subrogation is recovery from a liable third party, not from the injured worker.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Four, Your Duties If Injury Occurs, item 6

Correct answer: D. $35,000

Part Five includes in remuneration payments for all other persons whose work could make the insurer liable under Part One, and allows the contract price to be used if there are no payroll records. The charge does not apply if the employer proves the sub secured coverage. Total basis is $700,000. $700,000 / 100 = 7,000 units x $5.00 = $35,000. Leaving out the sub gives $30,000.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Five, C. Remuneration and E. Final Premium

Correct answer: A. Not less than 10 days

Part Six, Cancelation, requires the insurer to mail or deliver not less than ten days advance written notice stating when cancelation takes effect. Part Six also says any provision that conflicts with a state cancelation law is changed to comply, so many states require longer notice by statute or endorsement. Unless the manuals provide otherwise, final premium is pro rata when the insurer cancels and short-rate when the insured cancels.

Reference: NCCI WC 00 00 00 C (2013 ed., as reprinted in the NYCIRB WC & EL Manual), Part Six, D. Cancelation; Part Five, E. Final Premium

Correct answer: C. Nothing; the worker owes no deductible, copay, or coinsurance

Workers compensation medical benefits are provided without cost sharing by the worker: no deductible, copay, or coinsurance, and the worker does not use personal health insurance. Workers compensation is the primary payer for work-related care. An employer may choose a deductible plan with its insurer, but that is the employer's cost, not the worker's. Medical benefits apply only to the covered injury or illness.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Medical Benefits; Workers' Compensation Costs

Correct answer: B. $950

Two-thirds of $1,500 is $1,000, but the benefit cannot exceed the state maximum, so Elena receives $950 per week. Benefits replace only part of wages and are capped by state minimums and maximums tied to average wages in the state, so high earners often receive less than two-thirds. $1,500 is her full wage, and $500 is one-third of it.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Disability Benefits

Correct answer: A. $240

Temporary partial disability replaces part of the wage loss while a worker earns less during recovery. The loss is $900 - $540 = $360, and two-thirds of $360 is $240. Paying the full $360 would replace 100% of the loss. $600 is two-thirds of his full pre-injury wage, a total disability figure that does not apply because he is working and earning wages.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Disability Benefits (partial disability)

Correct answer: B. Aisha's is a scheduled injury, and Robert's is non-scheduled

Scheduled permanent partial awards apply to specific body members listed by statute, such as an arm, leg, hand, finger, thumb, eye, or hearing, and pay a set number of weeks for total or partial loss of use. Injuries to the back, internal organs, and other parts not on the schedule are non-scheduled and are rated to the body as a whole or by loss of earning capacity. Scheduled awards are often paid even if the worker returns to full wages.

Reference: Congressional Research Service, Workers' Compensation: Overview and Issues (R44580), Scheduled Awards for Permanent Partial Disabilities