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Workers Compensation

Practice questions on workers compensation for the casualty exam, each with an answer and explanation.

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Study questions and answers

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1. Under workers compensation laws, an injured employee generally gives up the right to sue the employer for a covered work injury in exchange for guaranteed benefits. This principle is called:

  1. Contributory negligence
  2. Vicarious liability
  3. Subrogation
  4. Exclusive remedy
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D. Exclusive remedy
Workers compensation is the employee's exclusive remedy against the employer for covered injuries. Benefits are paid without regard to fault.

2. Part One (Workers Compensation Insurance) of the standard workers compensation and employers liability policy pays:

  1. Damages the employer owes to third parties for any reason
  2. Up to a limit chosen by the employer on the declarations
  3. The benefits required by the workers compensation law of the states listed in the declarations
  4. Only medical bills, never lost wages
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C. The benefits required by the workers compensation law of the states listed in the declarations
Part One has no stated dollar limit. It pays whatever benefits the workers compensation law of the listed states requires.

3. Which type of benefit is NOT normally provided under workers compensation statutes?

  1. Medical expenses for the work injury
  2. Disability income for lost wages
  3. Rehabilitation benefits
  4. Payment for the employee's pain and suffering
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D. Payment for the employee's pain and suffering
Workers compensation pays medical, disability income, rehabilitation, and death benefits. Pain and suffering damages are not part of statutory benefits.

4. An employee is injured on the job and cannot work at all for six weeks, then returns to full duty with no lasting effects. This disability is classified as:

  1. Temporary total
  2. Temporary partial
  3. Permanent partial
  4. Permanent total
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A. Temporary total
The worker was completely unable to work for a limited time and then fully recovered, which is temporary total disability.

5. An employee loses two fingers in a work accident and returns to a modified job. This is best described as which type of disability?

  1. Permanent partial
  2. Temporary total
  3. Permanent total
  4. Temporary partial
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A. Permanent partial
The loss of a body part is permanent, but the worker can still work, so it is a permanent partial disability.

6. Part Two (Employers Liability Insurance) of the workers compensation policy is designed to cover:

  1. Statutory benefits owed to injured workers
  2. Damage to the employer's buildings
  3. Lawsuits against the employer arising from employee injuries that are not barred by the workers compensation law
  4. Fines for violating safety regulations
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C. Lawsuits against the employer arising from employee injuries that are not barred by the workers compensation law
Employers liability covers suits that fall outside the exclusive remedy, such as third-party-over actions and claims by an injured worker's spouse.

7. A machine maker is sued by an injured worker and then sues the worker's employer, claiming the employer removed a safety guard. Which coverage responds for the employer?

  1. Part One, Workers Compensation
  2. The CGL policy
  3. Part Three, Other States Insurance
  4. Part Two, Employers Liability
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D. Part Two, Employers Liability
This is a third-party-over action. It is a liability claim against the employer, which is covered under employers liability in Part Two.

8. The standard basic limits for Part Two, employers liability, are usually shown as:

  1. $100,000 each accident, $500,000 disease policy limit, $100,000 disease each employee
  2. $25,000 each accident, $50,000 disease policy limit, $25,000 disease each employee
  3. $1,000,000 each accident with no disease limit
  4. Unlimited, the same as Part One
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A. $100,000 each accident, $500,000 disease policy limit, $100,000 disease each employee
Employers liability has three limits: each accident for injury by accident, and a policy limit and each employee limit for injury by disease. The basic limits are 100/500/100.

9. An employer with operations only in Illinois has a worker injured while temporarily working in Indiana. Indiana is listed in Item 3.C of the declarations. Which part of the policy applies?

  1. Part One only, because Illinois law always controls
  2. Part Two, Employers Liability
  3. Part Three, Other States Insurance
  4. No part, because Indiana is not listed in Item 3.A
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C. Part Three, Other States Insurance
Part Three treats a state listed in Item 3.C as if it were listed in Item 3.A when work begins there, so benefits required by that state are paid.

10. In a monopolistic state, workers compensation coverage must be bought from:

  1. Any licensed private insurer
  2. A surplus lines insurer
  3. The state fund
  4. The federal government
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C. The state fund
Monopolistic states require employers to buy workers compensation from the state fund. Private insurers cannot write it there.

11. Because a monopolistic state fund usually does not provide employers liability coverage, employers there often add:

  1. Stop gap coverage
  2. An extended reporting period
  3. A fidelity bond
  4. Inland marine coverage
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A. Stop gap coverage
Stop gap coverage fills the missing employers liability protection for operations in monopolistic states, often by endorsement to the CGL or WC policy.

12. Workers compensation premium is usually based on the employer's:

  1. Gross sales
  2. Number of vehicles
  3. Payroll per $100, by job classification
  4. Square footage of the building
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C. Payroll per $100, by job classification
Rates are applied per $100 of payroll for each classification. A premium audit after the policy period adjusts the premium to actual payroll.

13. An employer with better-than-average loss history for its class may receive a lower workers compensation premium through:

  1. An experience modification factor
  2. A coinsurance credit
  3. A waiver of subrogation
  4. A deductible for each employee
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A. An experience modification factor
The experience modification compares the employer's actual losses to expected losses for its class. A factor below 1.00 lowers premium.

14. A merchant seaman injured on a vessel would normally seek benefits under which federal law rather than a state workers compensation act?

  1. The Longshore and Harbor Workers' Compensation Act
  2. The Social Security Act
  3. The Federal Employers' Liability Act
  4. The Jones Act
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D. The Jones Act
Seamen who are crew members of a vessel are covered by the Jones Act. Longshore workers and harbor workers fall under the USL&H Act instead.

15. Coverage for workers injured while loading and unloading ships on a dock, under federal law, is added to a workers compensation policy by:

  1. A United States Longshore and Harbor Workers' Compensation Act endorsement
  2. A Jones Act exclusion
  3. Part Three, Other States Insurance
  4. Stop gap coverage
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A. A United States Longshore and Harbor Workers' Compensation Act endorsement
The standard policy does not cover USL&H Act benefits. An endorsement is needed for employers with workers in that exposure.

16. Which statement about state second injury funds is correct?

  1. They pay all claims for repeat injuries in full
  2. They pay only for injuries to independent contractors
  3. They provide coverage for employers who have no workers compensation policy
  4. They limit an employer's cost when a worker with a prior impairment suffers a new injury that combines into a greater disability
Show answer
D. They limit an employer's cost when a worker with a prior impairment suffers a new injury that combines into a greater disability
Second injury funds encourage hiring workers with prior impairments by having the fund pay the extra cost caused by the combined disability.
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