Of Mutual Interest …

by John Godfrey
Retired jeweler and member, Retailers Mutual Board of Directors

Few policyholders realize how carefully the Retailers Mutual board considers and reviews each work comp claim. It is this process that enables us to be successful — settling claims efficiently and fairly, and disputing claims when warranted in order to control costs and discourage frivolous claims.

When an injury occurs, the employer files a report with Sedgwick Claims Management Services, our partner in processing claims. Our Sedgwick representative does the homework, collecting more information on the incident if necessary.

He provides a case history, including a recommendation, for each claim to the board’s Claims Committee about a week before the committee meets, allowing us time to review the claims and prepare questions.

The committee meets by conference call to review every claim, major or minor. If the claim is straightforward and the compensation will be less than $7,500, the committee can decide it; otherwise, it will go before the full Board of Directors, which hears the committee’s summary of the case before reaching a decision.

The committee will query Sedgwick about its recommendations, and sometimes we query attorneys as well. Sometimes we accept Sedgwick’s recommendations, but often we seek additional guidance on whether to raise or lower the award, or to do additional investigation before deciding.

We are not simply deciding whether the claim is valid or how much to award — we might also look for other partners in the claim. For example, after a slip-and-fall injury due to an icy walkway, we check whether the business owns the property or leases it, in which case the landlord might be a partner in a settlement or litigation.

The total number of years and experience on our five-member Claims Committee is very high. Most of us have served for 10 years or more and also have many years of retail and other business experience; a few are newer to the committee, gaining experience for when the older members leave the board.

For example, when a case is from a jewelry store, I might have questions about statements made in a claim, based on my experience as a jeweler. Others on the board have their own experiences to draw on. And all of us know the ins and outs of running a business. It is this practical experience with all types of business that enables our claims review to be thorough and fair.

Any insurance company can offer competitive pricing, but few others offer the unique combination of experience and understanding of work comp and small business in general that Retailers Mutual provides.

Do you know what your “mod” is and why it’s important for determining how much you pay for workers’ compensation insurance?

You should, because that knowledge can help you reduce your cost of work comp — or at least understand why your cost went up.

In work comp, each insured business gets its own experience modification rating, more commonly known as the “mod.” This rating, usually expressed in a number either less than, equal to or greater than 1, provides either a discount from or an addition to the rate an average business of that class of business would get.

The standard insurance rate for your type of business is multiplied by the mod to determine your actual premium. So you can see that the lower your mod, the lower your insurance premium. When it comes to your mod, lower is always better.

The complex formula for determining your mod is set by the Michigan Rating and Inspection Bureau. It takes into account various rating factors, especially your claims experience, payroll and premium. Generally speaking, the more payroll you have and the fewer claims, the lower your mod.

The most important thing to remember is that your mod is based on the cost and safety record of your business and is, therefore, under the control of your business.

One of the most important things you can do to reduce your mod from year to year is to improve workplace safety and reduce claims. The severity and frequency of your claims directly impact whether your mod rises or falls from year to year.

Some analysts believe that a history of small, recurring claims can have a greater negative impact on your mod than one large claim. Why? Because it suggests that a continuing problem exists at your business. Which is why you need to pay special attention to repeat accidents.

Taking every reasonable step to improve the safety environment of your workplace can pay off in a lower mod and the resulting lower work comp premium.

In Michigan, all private employers must have work comp coverage if:

• They regularly employ three or more workers at one time; or
• During the preceding 52 weeks they have regularly employed at least one worker for 35 hours or more per week for 13 weeks or longer.

All public employers must have coverage.

Any other employer can voluntarily choose to buy work comp coverage. By doing so, the employer is protected against being sued in the event a worker is injured on the job.

Michigan has special provisions that apply to contractors, subcontractors and sole proprietors. Details on these provisions are available here.

So, why do I need coverage?

Work comp is an employee’s “exclusive remedy” to offset the paid and lost time of a work-related injury or illness. In exchange for prompt payment of wage-loss benefits and medical treatment, employees give up the right to sue their employers for damages.

From the employer’s perspective, work comp provides protection against the potentially ruinous cost of lengthy lawsuits filed by injured employees. Damages for such suits could reach into the millions of dollars.

In fact, even employers who may be exempt may find that voluntarily providing work comp benefits is the best way to protect workers and the business against the costs of work-related injuries.

Employers forfeit the protections of the work comp laws when they deliberately cause injury to an employee. An employer is considered to have intended an injury if the employer knew that an injury was “certain to occur and willfully disregarded that knowledge,” according to the law.

You’ve probably been told that as a Michigan employer you are required by law to carry workers’ compensation insurance. But do you know why, and how the system works to protect you and your employees?

Here are the basics, according to the state’s Michigan Business Guide to Workers’ Comp.

Work comp is an insurance system, mutually beneficial to both employees and their employers. It serves two basic purposes:

• To provide benefits to employees who have suffered a work-related injury or illness; and
           
• To protect employers from costly litigation over claims of work-related injuries and illnesses.

Michigan’s work comp program is regarded as one of the strongest in the nation. Benefits to the injured employee can include one or more of the following:

• Appropriate medical treatment
           
• Partial replacement of lost income in cases where an employee is unable to work for more than seven days (or death benefits paid to dependent survivors in the event of a fatal injury or illness); and
          
• Vocational rehabilitation so the injured worker can return to gainful employment as quickly as possible.

Work comp is the oldest form of no-fault insurance. First established in Germany in 1856 and adopted soon after by England and most of Western Europe, work comp insurance was enacted in Michigan in 1912. By 1920, all but eight of the other states had passed work comp laws.

Work comp is “no fault” in the sense that benefits are paid without regard to who or what caused or contributed to an injury or illness that “arises out of, or in the course of, employment.” Before this system was established, an employer could be sued for negligence and could only defend against such lawsuits by proving that the employee was at least partially at fault, that a fellow employee contributed to the injury, or that the employee assumed the risk of potential injury by accepting the job.

That’s why we say work comp protects both you and your employees.