Glossary of Workers Compensation Terms
You may either scroll down this list of
terms, or click on the letters below to go to
that section.
A | B
| C | D | E | F
| G | H | I | L | M | N |
O | P | R | S | T | U | V | W
A
Accidental Injury An injury that was unintentional, from both the injured
employee's and employer's point of view.
Aggregate Limit The maximum amount of damages an insurance company will pay under a
contract or section of an insurance policy under the policy period.
Average Weekly Wage Typically an amount based upon the employee's actual wages
earned during the previous year, adjusted by a statutory percentage to provide the amount
of weekly disability benefits payable to an injured worker.
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B
Basic Premium The workers' compensation premium calculated by multiplying a
specified rate by the number of hundreds of dollars of an employer's payroll.
Bodily Injury by Accident; Bodily Injury by Disease Terms used to describe the
differences between bodily injury due to "accident" and bodily injury due to
"disease," so that one injury cannot be deemed to fall within both categories.
The distinction is important since the limits of liability under Part Two - Employers
Liability apply differently to each.
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C
Cancellation Termination of an insurance contract before the end of the period
specified in the policy. A policy may be canceled by either the policyholder or the
insurance company, subject to provisions spelled out in the policy.
Cancellation, Flat Cancellation of an insurance policy before it ever goes into
effect. No premium is charged.
Cancellation, Pro-Rata Termination of an insurance policy with the premium adjusted
in proportion to the exact time the coverage has been in force.
Cancellation, Short-Rate An insurance policy is terminated at the request of the
policyholder. The policyholder gets back a portion of premium paid, minus a small amount
charged by the insurance company for processing the transaction.
Claim A demand to recover what's due under an insurance policy or the
estimated or actual amount of a loss.
Claimant The person who makes a claim.
Classification Code Number The identifying number for an occupational
classification found in the Workers' Compensation Manual that governs workers'
compensation insurance policies.
Compulsory Law A type of state workers' compensation law that requires each
employer to accept and comply with all the law's provisions. Also see Elective Law.
Contract A legal agreement between two parties for consideration. An insurance
policy is a contract.
Contributory Negligence Lack of care on the injured individual's part, contributing
to the injury. Where applied, the concept of contributory negligence can prevent the
injured worker from recovering damages under employer liability laws. One of the common
law defenses available to an employer.
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D
Deposit Premium A provisional premium based on the probable amount of payroll
calculated at the beginning of the policy year, then adjusted following an audit when the
policy period ends.
Disability This term refers to the inability to continue one's normal occupation
due to personal injury or illness or to a physical condition unrelated to the ability to
work. In workers' compensation cases, specific definitions apply to disabilities that are
partial, total, temporary and permanent.
Disability Benefits Payments that compensate a disabled employee for loss of income
or earning capacity. In practice, this term may also refer to benefits paid for an injury
regardless of its effect on earning ability.
Disfigurement Benefits A type of lump-sum disability benefit paid because of a
theoretical disadvantage the injured worker suffers in attaining employment, for example,
an injury that physically disfigures the person.
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E
Effective Date The starting date of a policy; the time at which the insurance
protection begins.
Employee One who performs services for another under a contract of hire, express or
implied; acts under the direction and control of the person by whom he or she is hired;
and performs a service for pay. Also see Independent Contractor.
Employer A person, firm, partnership, association, corporation, a legal
representative of a deceased employer, or the receiver or trustee of a person,
partnership, association, or corporation who uses or engages the service of another under
a contract of hire.
Employers Liability Insurance Coverage to protect an employer against claims
for damages arising out of injuries to employees in the course of work. A workers'
compensation policy insures the employer against liability under state compensation laws.
Employer liability insurance provides protection in cases not covered by the compensation
law.
Endorsement An amendment in writing (including print or stamping) added to and made
a part of an insurance contract to change the original terms by restricting, expanding or
otherwise modifying the standard coverage.
Exclusion Something not covered by an insurance policy as specifically stated in
the policy contract.
Experience A record of premiums and losses under a policy; the basis upon which
future rates or costs are predicted.
Experience Modification A provision for premium adjustment that recognizes
the merits or demerits of individual risks. Used to compute insurance premiums.
Expiration The date insurance protection under a policy ends.
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F
Final Premium The premium the policyholder must pay after an audit has been
conducted. It is based on the actual amount of payroll calculated at the end of the policy
year.
Full Coverage Coverage for all occupational diseases, including automatic extension
to new diseases as they appear.
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G
General Exclusions For workers' compensation insurance rating purposes, this term
refers to certain employer operations that are not anticipated in the classification code
number assigned when the policy is written. Such exclusions represent specified activities
that require a separate classification code number.
General Inclusions Incidental but necessary operations normally included as part of
the policyholder's primary business operations.
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H
Hazard Anything that increases the chance of loss or the frequency or severity of a
loss.
Hazardous Refers in many states, either through the wording of the law itself or by
virtue of court interpretations through the years, to employment that involves working in
or around machinery. Formerly a requirement for workers' compensation coverage in some
jurisdictions, but no longer an issue.
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I
Independent Contractor One who is not on the policyholder's normal payroll even
though he or she works for the policyholder for wages. Under workers' compensation law,
differentiating an independent contractor from an employee has been construed variously by
courts of law, usually in a manner that ensures the worker will receive benefits either
from the employer or from another source.
Industrial Disability In certain jurisdictions, this term refers to an individual's
loss of earnings as the criterion upon which total or partial disability is based. See
Medical Disability.
Information Page The portion of a workers' compensation policy that contains
identifying data such as name and address of the policyholder, policy period, coverage and
premiums.
Insurance A contract or device for transferring risk from a person, business or
organization to an insurance company that agrees, in exchange for a premium, to pay for
losses through accumulation of premiums.
Insured The person or organization covered by an insurance policy. Also see
Policyholder.
Insuring Agreements The portion of an insurance contract that broadly specifies the
coverage the policy provides.
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L
Limits of Liability Maximum amount an insurance company agrees to pay when a
covered loss occurs. On a workers' compensation and employers liability policy, limits of
liability apply only to the employers liability portion. The workers' compensation part of
the policy has no limits. Instead benefits are paid as required by state law. Also called
liability limits or limits of insurance.
Longshore and Harbor Workers' Compensation Act Coverage Endorsement An endorsement
required by federal law for employers who employ maritime workers to work in, on, or
around navigable waters of the U.S. and its territories, but not masters or members of
ship crews.
Loss Adjustment Expense (LAE) Costs associated with settling insurance claims, apart
from the claim itself. Includes both allocated expense (ALAE), which can be applied to a
specific claim, and unallocated expense (ULAE), such as general overhead, that is not
applied to a specific claim. LAE is considered in setting claim reserves.
Loss of Consortium The loss of companionship experienced by the injured employee's
spouse. Monetary payment for this loss sometimes is included in the workers' compensation
claim settlement.
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M
Manual Premium A premium determined by multiplying a published rate (the manual
rate) by the number of hundreds of dollars of the policyholder's payroll.
Medical Benefits Workers' compensation benefits covering the cost of medical
services, usually provided without dollar or time limits. The majority of workplace
injuries involve medical benefits only, since substantial impairment or wage loss is not
typically the case.
Medical Disability In certain jurisdictions, this term refers to how an
individual's physical condition affects functioning as the criterion upon which total or
partial disability is based. Also see Industrial Disability.
Medical Rehabilitation A process of returning an injured employee to improved
physical functioning. Also see Vocational Rehabilitation.
Minimum Premium The smallest premium that will be charged for a policy, regardless
of how small the payroll is and whether or not the actual calculated premium is less.
Monopolistic State Fund A state workers' compensation insurance plan established by
law as the only provider of workers' compensation insurance in the state. This fund
prohibits private insurers from writing workers' compensation insurance. Also called
Exclusive State Fund.
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N
Negligence Failure to do what a prudent individual would ordinarily do under
particular circumstances or, conversely, doing what a prudent person would not have done.
Negligence may be caused by acts of omission or both.
Negligence of a Fellow Employee A doctrine whereby the employer is not held liable
for injury one employee inflicts upon another. Sometimes called the Fellow Servant Rule,
whereby the master is held not liable for injury to one servant by another. One of the
common law defenses available to employers.
NOC An abbreviation for "Not Otherwise Classified," referring to risks
for which no classification definitions precisely describe the operation.
No-Fault Liability The basic legal concept of the workers' compensation system
whereby the cost of occupational injuries or diseases is assessed against the employer
regardless of whether the employer was negligent or otherwise responsible under common
law.
Nonoccupational Disease A disease not related to or arising from a particular type
of employment, but rather, a disease to which members of the general public are just as
likely to be exposed.
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O
Occupational Disease An injury involving disease that arises out of employment due
to causes or conditions characteristic of and peculiar to the particular trade,
occupation, process or employment, and excluding ordinary diseases to which the general
public is exposed.
Occupational Safety and Health Act (OSHA) A law that encourages employers and
employees to reduce workplace hazards and improve safety and health programs.
Occupational Injury An injury occurring in the course of employment and caused by
inherent or related hazards. Under some workers' compensation statutes, this term refers
to disease as well as injury.
Occupational Risk The theory that the financial cost of employment-related
accidents and diseases is a legitimate cost of production, and should be shifted to the
consumer in the product price (like depreciation or similar costs).
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P
Permanent Partial Disability A condition that is actually or presumptively
considered the equivalent of a complete and permanent loss of earning power. Many
compensation laws state that certain injuries, such as total loss of sight, loss of both
hands or both legs, constitute permanent total disability regardless of the policyholder's
ability to perform some type of gainful work. Also see Industrial Disability and Medical
Disability.
Policy An insurance contract.
Policyholder The person or organization covered by an insurance policy. Also see
Insured.
Policy Period The length of time an insurance policy is in effect, commonly one
year.
Premium The consideration or money paid to an insurance company in return for
insurance protection.
Premium Audit An examination of the policyholder's payroll records by a
representative of the insurance company. Typically done at the end of a policy period, an
audit determines the actual premium due.
Premium Discount A percentage discount based on the size of the computed premium,
with larger premiums subject to larger percentage discounts. The discount is designed to
distribute the cost of workers' compensation insurance equitably among risks of all sizes,
so that larger policies pay no more than their fair share of loss costs and insurance
company expenses.
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R
Rate The cost of a unit of insurance for a specified period.
Rehabilitation A process of restoring an injured or handicapped individual to the
fullest physical, mental, social, vocational and economic usefulness to which they are
capable.
Rehabilitation Benefits Medical rehabilitation and vocational rehabilitation
benefits for cases involving severe disabilities.
Reimbursement Payment of money related to a loss to, or on behalf of, the insured
when a loss, as defined in the policy, occurs.
Remuneration The entire earnings, wages, money or other substitute for money of all
employees engaged in operations covered by a workers' compensation policy, including
executive officers and other employees engaged in operations covered by the policy, during
the policy period.
Retroactive Period A specified number of work days or weeks during which injured
employees must be out of work before disability benefits begin. After the period has
passed, compensation benefits are paid from the date of injury, including the waiting
period. Also see Waiting Period.
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S
Scheduled Benefits Specific dollar amounts as stipulated by workers' compensation
laws to be paid for certain injuries without regard to other factors, such as ability to
work. Typically paid only for severe and permanent injuries.
Scheduled Injury A specific and, usually, severe and permanent injury listed in the
workers' compensation law, such as loss of limb or loss for hearing, for which a specified
amount of compensation is paid (whether or not the employee suffers a loss of earning
power). The amount to be paid is called a scheduled benefit.
Second Injury Fund Helps pay workers' compensation costs when a preexisting injury
combines with a subsequent injury to produce liability greater than that caused by the
second injury alone. Typically, the funds are accumulated by assessing insurers and
self-insurers, employer payments, portions of death benefits when no dependents survive or
by legislated appropriations. Also called special injury funds and subsequent injury
funds.
Self-Insurance A funding method under which the employer assumes the liability for
paying workers' compensation benefits. Some jurisdictions permit group self-insurance,
whereby small employers pool their resources to insure each other's workers' compensation
obligations.
Subrogation Transfer of recovery rights from a policyholder to the insurance
company when the insurance company pays a claim brought against the policyholder.
Survivor Benefits Payments designed to help compensate the survivors of an employee
whose death results from a job-related injury. Also called death benefits.
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T
Temporary Partial Disability A condition resulting in a partial loss of earning
power or ability to work, from which recovery can be expected.
Temporary Total Disability A condition that completely prevents the employee from
working, but from which complete or partial recovery can be expected, enabling the
employee to return to work.
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U
Underwrite The insurance function that scrutinizes relevant characteristics of a
proposed policyholder to determine eligibility and acceptability for insurance.
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V
Vocational Rehabilitation The process of returning an injured employee to an
employable condition. Also see Medical Rehabilitation.
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W
Waiting Period A statutory period following an employee's injury during which
income benefits are not paid. Waiting periods apply only to compensation benefits. Medical
benefits are provided immediately. If disability continues for a certain number of days or
weeks, most laws provide for payment of income benefits retroactive to the date of injury,
including the waiting period. Also see Retroactive Period.
Workers' Compensation Insurance Coverage required by state law to provide
compensation for workers who are injured on the job in the course of their employment.
Workers' Compensation Law Rules of conduct or action prescribed and enforced by a
controlling authority to govern employer-employee relations in handling occupational
disabilities. All states, the District of Columbia and the U.S. territories have enacted
workers' compensation laws. Federal workers' compensation laws apply to certain
employment.
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