The coronavirus pandemic gripping the globe has had profound effects on businesses of every size and type. Millions of people have been laid off in the wake of economic turmoil. Still, many employees of companies have been forced to balance work with safety considerations, potentially leading to serious risks regarding their personal health. Workers in establishments deemed “essential,” including retail, healthcare, and foodservice operations, are at higher risk of contracting COVID-19 in the workplace; in these cases, workers’ compensation insurance may be called upon to provide financial relief for affected workers. In this guide, insurance agents can learn what their clients should consider following the economic devastation of COVID-19 and the effects it has had on workers’ comp claims.
COVID-19 in the Workplace
Around the world, employers have scrambled to provide their workers with safe workplaces in the wake of the pandemic. Many employers have adopted remote-working environments or reduced the numbers of employees present in a workspace in efforts to contain the spread of the coronavirus. Not all employers have those options, however, and workers have been tasked with keeping operations running in person.
Under workers’ comp regulations in certain states, classes of employees known as “public health workers” that contract communicable diseases – including COVID-19 – are assumed to have been exposed in the workplace. In other words, their illness is directly related to employment, and as such is covered under workers’ comp policies. This is referred to as presumption of compensability.
What about other classes of employees, such as those manning grocery stores, banks, gas stations, restaurants, and retail establishments? Are these employees covered under workers’ comp if they contract COVID-19? The answer is far from clear. States like New Jersey do not have presumptions of compensability for other classes of workers, including those deemed essential. Under current laws in New Jersey and in other states, employees who are infected by COVID-19 may have a difficult time establishing a direct connection between their employment and the disease, leaving them unprotected by workers’ comp coverage. Infected workers not covered by their employers’ workers’ comp plans may have to seek other benefits, including unemployment or temporary disability insurance. Luckily, lawmakers in states like New York, California, Vermont, and Kentucky have begun to address potential shortfalls in workers’ comp coverage, introducing bills that create a presumption of compensability for essential workers infected by the coronavirus.
A Grim Financial Outlook for Employers
The National Council on Compensation Insurance (NCCI) has studied the potential impact of COVID-19 on employers. In an analysis conducted by the group, several scenarios were considered. In the worst-case scenario presented in the analysis, if 50 percent of workers are infected and 60 percent of the resulting claims are considered compensable, the result is a loss rate nearly three times the current cost, or a figure exceeding $81 billion. In another scenario, only first responders and workers in the healthcare sector are eligible for workers’ comp, and five percent of those workers are infected. If 60 percent of the resulting claims are paid, the increased costs would reach $2 billion.
Working with Employers Faced with Staggering Workers’ Comp Claims
Insurance agents have faced their own share of struggles in response to the coronavirus pandemic. With rising claims and increased risks, employers often reach out to their insurers for information on solutions. While there remains much volatility in terms of legislation protecting more workers infected by COVID-19, insurance agents can help their clients navigate the concerns surrounding the pandemic.
The crucial step for agents is to carefully review existing workers’ comp coverage with clients, giving them a clear understanding of what is and what is not covered under the plan and applicable state laws. Where gaps in coverage arise, agents can recommend alternative insurance programs, including temporary disability and unemployment insurance. Agents can also put together resources for their clients, including information on benefits provided by federal laws like the Coronavirus Aid Relief and Economic Security (CARES) Act as well as the Families First Coronavirus Response Act. Claims of infected workers will continue to skyrocket for the foreseeable future, particularly among essential workers and as more businesses begin to emerge from lockdown orders. By managing claims as they arise, employers and insurance agents can work to keep expenses under control, allowing them to better weather the impacts of the pandemic over the long term.
About U.S. Risk
U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.