THE DIFFERENCE BETWEEN WORKMEN’S COMPENSATION INSURANCE AND EMPLOYER’S LIABILITY INSURANCE (by Tarran Dookie)
Sometimes there is confusion between workmen’s compensation insurance and employer’s liability insurance. In many jurisdictions workmen’s compensation insurance is compulsory (e.g. most of the USA, Canada, Australia, Germany, Trinidad & Tobago) whereas in some jurisdictions employer’s liability insurance rather than workmen’s compensation is compulsory (the United Kingdom is the best example). In the US system of workers’ compensation the worker’s entitlement to statutory benefits is in exchange for mandatory relinquishment of his right to sue the employer for negligence. In Trinidad and Tobago workmen’s compensation and corresponding insurance is compulsory but not at the expense of the employee giving up his or her right to sue the employer for negligence.
Workmen’s compensation and sometimes workmen’s compensation insurance is a statutory requirement whereas employer’s liability may not be a statutory requirement. This is true of Trinidad and Tobago. The Workmen’s Compensation Act Ch 88:05 (Act 24 of 1960 as amended) imposes an obligation on all employers to provide compensation as outlined in the Act and furthermore by virtue of Part V it is compulsory for all employers (except the State) to effect corresponding workmen’s compensation insurance.
The Act creates a statutory liability requiring employers to provide compensation in the event that a workman suffers illness or dies or is injured in the course of employment. With little exception this means that the employer is liable to provide compensation regardless of whether or not the employer was negligent. It does not matter whether the accident resulted from the employee disobeying the employer’s regulations or that he was acting without instructions. Once the act was done for the purposes of and in connection with the employer’s trade or business, he is liable to pay damages to the employee. In law this is known as strict liability. Insurance covering this statutory obligation is compulsory. Regrettably not all employers adhere to the law and many do not have insurance in place. This is particularly true of small enterprises.
Briefly the compensation outlined in the Act are:
a)Death: 36 times the average monthly wages for the 12 months prior to the injury. ( If there are no dependants, the lump sum payment will be to cover the cost of burial expenses not exceeding TT$500.00)
b)Permanent Total Disablement: 48 times the average monthly wages for the 12 months prior to the injury.
c)Permanent Partial Disablement (PPD): 48 times the average monthly wages for the 12 months prior to the injury × the % PPD minus wages paid to the employee during injury leave (subject to a maximum of 50% of the PPD assessment).
d)Temporary Disablement: Two thirds of the average monthly wages for the 12 months prior to the injury × number of days injury leave/30.
e)Medical expenses: The employer is also liable for medical expenses incurred by the employee to the extent of $500.00
Employer’s liability is also referred to as common law liability and must be distinguished from statutory liability. Where the employee has received full compensation as authorised by the Act and more than four years elapse from the date when the cause of action accrued, the employee cannot sue the employer for any further sums. However, an action can be brought once the four years have not elapsed. Employees (or their dependants in case of death) often bring an action if they are of the view that the compensation they have received under the Act is insufficient in light of the gravity of their injury. One must realise that three or four years earnings often would only provide relief for a limited period and for serious injuries such compensation is woefully inadequate.
A further consideration is that the Workmen’s Compensation Act restricts claims for illness arising from employment to a specified list or schedule of occupational diseases. Most of these occupational diseases are factory-related and would exclude something like carpal tunnel syndrome. The employee may be left with no other recourse but a common law action if his illness lies outside the scope of the schedule of occupational diseases in the Act.
At common law the employer is only liable to pay the employee for injury or illness suffered on the job where the accident occurred due to the employer’s negligence. The employee must establish that the employer failed to use reasonable care in :
- providing suitable and safe plant;
- providing a safe workplace;
- providing a safe system of work;
- engaging suitable and competent employees.
The measure of damages at common law is dependent upon the actual loss suffered. The employer would be liable for general damages (e.g. loss of limbs, loss of amenities, pain and suffering, loss of expectation of life), special damages (e.g. loss of wages). Damages at common law are not fixed as under the Workmen’s Compensation Act but are assessed by the courts, each case being determined on its own merits.
COVERAGE UNDER LOCAL POLICIES
Almost all policies issued on the local market grant two-fold cover. The policy covers both the statutory liability under the Workmen’s Compensation Act Ch 88:05 as well as the common law liability (employer’s liability) of the employer.
An award of damages under common law can far exceed the amount payable under the Act. It is for this reason that many insurers limit their liability under common law to TT$2,500,000 for all claims arising out of any one accident or event. It must be appreciated that a limit of $2,500,000 can prove to be insufficient in a serious accident that involves a number of workers. Sometimes higher limits (up to US$1,000,000) are sought and insurers generally grant the increased limits for extra premium.
Medical expenses coverage is often increased from the statutory limit of $500 to sums ranging from $5,000 to $25,000. Various extensions are also available. These include but is limited to: Additional activities (such as Sports and Family Days and exhibitions), Contractors’ employees, Indemnity to principals, Overseas business trips, Waiver of subrogation.