Workmen’s compensation vs employers’ liability policy

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…Who is responsible for employees’ injuries at the workplace? Is it the employer or employee?

This article will help you answer these questions and also provide more insight into workmen’s compensation policy/employer’s liability policy and its benefits.

Does your business need a workmen’s compensation policy?

The answer to this question is almost always ‘yes’. Every employer is expected or required to compensate their employees for any injury sustained in the course of their employment. It is therefore important for every employer to have a Workmen’s compensation/Employer’s Liability policy as part of their business model.

What is a Workmen’s Compensation Policy?

The Workmen’s Compensation Policy is an insurance policy issued by an insurance company to provide indemnity to employers for all sums which an employer may be liable for in respect of injury to their employees by accident or disease under the Workmen’s compensation Act 1987 (PNDC Law 187). Employment and Labour issues in Ghana are regulated by the Labour Act, 2003 (Act 651).

This Act consolidate all laws relating to labour, employers, trade unions and industrial relations. Edwards, 2003, described the relationship between employer and employee as a system wherein both parties have common and divergent interest; this is a situation where employer and employee communicate their requirement and views to one another in terms of agreement on work-related issues.  Examples of injuries covered are: injuries caused by faulty equipment, trips and falls, burns or other injuries caused by fire, injuries caused by employee-negligence etc.

Employers – include government, any statutory body or authority, any person or body of persons whether in corporate or not, and the legal personal representative of a deceased employer. The Labour Act 2003 (Act 651) Section 9C requires employers to “take all practicable steps to ensure that their workers are free from risk of personal injury or damage to his or her health during and in the course of the worker’s employment, or while lawfully on the employer’s premises”. The employer is liable for personal injury to his workmen by accident arising out of and in the course of employment or any diseases.

A workman – is any person under a contract of service with an employer, whether by way of manual labour, clerical work or otherwise; and whether such contract is expressed or implied, oral or in writing. The Labour Act 2003 (Act 651) Section 10A states that an employee has the right to “work under satisfactory, safe and healthy conditions”.

Workmen’s compensation Act 1987 (PNDC Law 187)

The primary legal authority for Workmen’s Compensation regime and administration in Ghana is the Workmen’s Compensation Law of 1987. The Act recasts the law in relation to compensation awarded to workers for personal injuries arising out of and in the course of their employment.  The new enactment grew out of a study undertaken by the Tripartite National Advisory Committee on Labour. It repeals the Workmen’s Compensation Act 1963 (No. 174) and the 1966, 1968 and 1969 amendments thereto.

Statutory Instruments made under those Acts remain in force until amended, varied or revoked in accordance with provisions of the new law. Section 1 of the Act states that: “This Act applies to employees employed by the Republic as well as private persons, except in the case of persons in the Armed Forces”. Section 2(1) also states that: “Where an employee sustains personal injury by accident arising out of, and in the course of employment, the employer is liable, subject to this Act, to pay compensation in accordance with this Act”.

Is there any difference between Workmen’s Compensation and Employer’s liability policy?

Workmen’s compensation policy provides cover for injury or illness at the workplace without the employee alleging any liability on the employer. Employers’ liability policy, on the other hand, is triggered when the employer is being sued for negligence by the injured employee. Employer’s liability covers all legal expenses. For example, if one of your workmen or employees gets injured at the workplace, the Workmen’s compensation policy will cater for that employee’s injury. This will take place if the employee gives up their right to sue the employer in relation to their injury.

There are cases when the employee will give up these benefits and sue the employer for damages if they believe the injury was caused by gross negligence or intentional harm by the employer. Employees will usually choose this option if they believe they can win the case and get more compensation. If such claims arise, employer’s liability – which is usually built in the workmen’s compensation policy – is triggered to cover for the cost of all legal defence. Both policies cover workplace injury, just a different aspect of it.  The two policies complement each other, and most insurance companies sell them as a non-separable package.

What details do insurance companies require in order to enable them issue a Workmen’s Compensation Policy/Employer’s Liability Policy?

The employer will need to complete a proposal form, which will form the basis of the insurance contract. Main details required on the proposal form are:

  1. Full details on the number of employees (name, sex, position etc.). The employer must give full information on the number of employees in each employment class. The employment class can be clerical (bank staff) or non-clerical (construction workers).
  2. Their estimated annual earnings.
  • Safety mechanisms in place to prevent accident and any other injuries at the workplace.
  1. Claims history or previous insurance history with any other insurance company.

Wages adjustment statement

This is a statement sent by the insurance company in addition to a renewal notice to the employer at the end of every year. The statement will give information about the total number and class of insured employees, their wages and salaries paid to them in the past year. This is to enable any adjustment in premium to be made; either by imposing an additional premium or by refunding part of the premium paid at commencement of the year.

What does workmen’s compensation/Employer’s liability policy cover?

Medical Expenses

The policy provides medical bills cover for all injuries sustained by employees at their place of work. This include all emergency medical care, prescriptions and cost of surgery. For example, if one of your electricians falls and breaks his leg at a customer’s house while fixing their air-conditioner, workmen’s compensation will cover their hospital bills.

Compensation for temporal incapacity

The policy provides periodic payment of a lump-sum for employees who are temporarily incapacitated (whether total or partial) as a result of injuries sustained at the workplace. The periodic payment shall be the difference between monthly earnings the employee was making at the time of accident, and the monthly earnings which the employee is earning or is capable of earning in any other suitable employment or business after the accident.

Compensation for Permanent total incapacity

When permanent total incapacity results from the injury, the amount of compensation shall be a sum of money equal to ninety-six months’ earnings according to the workmen’s compensation Act 1987 (PNDC Law 187).

Legal cost

Employer’s liability policy provides cover for all legal costs. This includes all damages in respect of judgement delivered by a court of competent jurisdiction for injuries suffered by an employee as a result of the employer’s negligence.

What are the general exclusions under a Workmen’s Compensation/Employer’s Liability policy?

A Workmen’s Compensation/Employer’s Liability policy, like any other general insurance policy, has exclusions. Exclusions refer to cases which are not covered under the policy. The most common exclusions applicable to workmen’s compensation policy are listed below:

  1. Death or injury by accident or disease directly attributable to; war; invasion; act of foreign enemy hostilities (whether war be declared or not).
  2. Self-inflicted injuries caused by the employee, or with the knowledge of the employer.
  3. The policy does not cover employees of any contractor employed by the insured or the policyholder.
  4. Any claim arising from an event known to the employer or business owner prior to inception of the insurance policy

How do I buy a Workmen’s compensation/Employer’s liability insurance policy?

The most common channels available to purchase a workmen’s compensation policy is through the direct insurer or an intermediary (broker or agent).

  1. Buying a policy directly from the insurance company

Employers can buy their workmen’s compensation policy by directly contacting insurance companies.

  1. Buying the policy through an insurance broker or agent

Employers can also purchase a travel insurance policy through insurance brokers or agents. Insurance brokers are independent intermediaries who can assist you to purchase your insurance package from any insurance company of your choice. Most corporate organisations use the services of insurance brokers due to technicalities surrounding the policy and the extra professional services they provide.

How much does a workmen’s compensation policy cost?

The cost of purchasing a workmen’s compensation policy depends on the category of work your business is engaged in, and your total annual salary. Premiums are expected to be higher for employees engaged in dangerous activities, such as construction or mining, than an office worker. For example, the minimum premium that will be payable for a non-clerical employee with an annual salary of GH¢100,000 would be GH¢1,477.

How do I make a claim under Workmen’s Compensation/Employer’s Liability?

The claims process for a Workmen’s compensation or employer’s liability insurance policy is a little bit different from other general insurance policies. Employers or employees need to take the following steps in making a claim under this policy:

  1. Claim notification

Claim notification is the first step to be taken by the employer/employee in the event of an employee injury. They are required to notify both the insurance company and the Labour Office. In Ghana, the Labour Office is the body responsible for computation of employee benefits or compensation in the event of workplace injury.

  1. Complete claims and medical report form

The employer or employee is required to complete and submit a claims and medical report form issued by their insurance company and the Labour Office respectively. The medical report form is supposed to be completed by a medical practitioner. The report is expected to provide information on the medical disability rate and degree of incapacity of the injured employee.

  1. Claims assessment and computation of compensation

Claims assessment and benefits computation are performed by the Labour Office. The Labour Office considers the extent to which the employee’s impairment affects his or her earning ability, ability to return to work or do any similar job, and his or her physical ability in determining the amount of compensation. The degree of incapacity could be 65%, 70%, 90% or 100%. The Labour Office issues a computation sheet to be presented to the insurance company for payment. The computation sheet is submitted together with the claims and medical report form.

  1. Claims payment

Claims payment is the last stage in the claims management process of every insurance company. Claims are paid by taking into consideration the Highest Executive Salary (HES). Claims are paid by taking into consideration the highest executive salary. The mode of claims payment can be cheque, bank transfer or mobile money.

Conclusion

Employers have the ultimate responsibility to cater for all injuries sustained by employees at their place of work. Having an insurance policy to cover workplace injury is very important, even if it is not mandatory in the jurisdiction where your business operates. Every business would do well to include this type of policy in their business model.

Workmen’s compensation/Employer’s Liability insurance policy provides peace of mind to both the employer and employee in the event of accident or illness. The majority of non-life insurance companies in Ghana underwrite this policy. Employers can either patronise the policy directly from their trusted insurers or rely on their intermediaries for any professional advice.

Reference

>>>The writer is a chartered insurance Practitioner and an Associate of the Chartered insurance institute of UK. He also holds a professional qualification in Risk Management (Associate in Risk Management -ARM) from the American Insurance Institute. He is currently pursuing his CPCU designation with the American Insurance Institute and MBA (Finance) programme with the University of Ghana Business School. He has over nine (9) years’ experience in insurance, reinsurance and risk management. He can be reached on +233249236939 and or [email protected] / [email protected]

 

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