Most organizations purchase workmen compensation insurance as an annual contract. However, the number of workers in any organisation could keep changing throughout the year. Thus, any or both of the following two situations may occur at the time of a claim:
- Number of workers employed by the insured is different from what was provided at the time of contract
- Average pay of the workers is different from what was provided in the contract
The “all employees covered” clause implies that even if the number of employees is more than the registered employees/workers in the insurance plan, the insurer will assume that all the employees are covered under the workmen compensation insurance plan.
Similarly, in the case of a difference in the average pay, the workmen compensation insurer will prorate the coverage assuming that the employee/worker is covered under the plan.
This pro-rating process may increase the employer’s liability at the time of the claim if the average pay or number of workers is more than what was stated in the insurance proposal.
Case Study: 1
From the last five years, K.S Clothing Mills had carved a niche for itself in the industry. As the nature of the business involved working with machines, the company bought a workmen compensation insurance policy at the time of inception. The company which was started with 100 employees reached 500 in 2019. In the same year, one of its employees, Rajesh Singh, met with an accident while working at the mill.
On a fateful day, Rajesh was working on a machine when his leg got caught inn the machine, and he suffered major injuries. Though he was rushed to the hospital; doctors had to amputate part of his leg to save his life.
As Rajesh was the breadwinner of the family, their future seemed bleak.
However the worker compensation insurance policy purchased by K.S Clothing Mill came to his rescue. Though he had joined the company a few months ago, and the company had not informed the insurer about his joining, he was entitled to get compensation under the policy.
Upon receiving the claim intimation, the workers’ compensation insurer asked for various documents like duly filled claim form, doctor’s prescription, medical bills, etc. Here the insurer offered the following two coverages
- Medical Expenses Cover: As Rajesh was treated in the hospital, the insurer settled the medical expenses incurred on his treatment.
- Disability Cover: Due to the accident, Rajesh lost his leg and was disabled. Here, the insurer offered him disability benefits to cover the loss of income.
The insurer also covered transportation expenses incurred on taking Rajesh to the hospital.
Despite the fact that Rajesh had joined the company only a few months prior to the accident and K.S Clothing Mill had not informed the worker compensation insurance company about his joining, the insurer offered the coverage.
Case Study: 2
LKML Lighting had a flourishing business of manufacturing lamps. The company had bought a workmen compensation insurance policy to cover legal liability coverage in case any of its workers got injured or died at the workplace during working hours.
At the time of buying the insurance policy, the company had 30 employees which increased to 300 by 2018. With the increased number of employees there was an increase in the average salary as well.
In 2019, one of its employees, Manoj Rai slipped on the factory floor and broke his left arm. He was taken to the hospital where initial reports suggested he’d suffered a fracture. As the accident took place in the factory, and there was no fault of Manoj, the employer was liable to pay compensation to the injured employee.
Here, it is important to know that the workmen compensation insurance policy was bought much before 2019. During the intervening years, there had been a rise in workers’ incomes which had not been communicated to the insurance company. Still the insurer agreed to settle the claim. The worker’s compensation insurance company paid compensation which was computed on the basis of the current salary of Manoj.