What is the exclusive remedy for risk management and small business professionals? In the world of insurance, the term ‘exclusive remedy‘ refers to the workers’ compensation system. These systems are administered by the sate governments of each individual state, not the federal government. In most states, this grand bargain began around 100 years ago. It was an agreement between employment and labor during a time when many employers severely abused the rights of workers. As a result of these abuses, many workers were beginning to unionize. In an attempt to keep both sides happy, most states created a workers compensation system to deal with both medical benefits to employees and protection from most lawsuits for employers.
These workers’ compensation systems are administered by each individual state and not the federal government. Because of this, each state provides the system a tad bit different. Wisconsin was the first state to administer a workers’ compensation system in the year 1911. Mississippi was the last state to come around to the exclusive remedy in 1948.
The term ‘exclusive remedy‘ came about because the benefits that are provided under the workers compensation system are supposed to be the sole remedy available to employees injured on the job. The benefits to employees are, they have the confidence to go to work knowing that if they are injured on the job they will have their medical costs covered and some lost wages. Employers benefit from the system by having most lawsuits taken away for injuries that occur as a normal part of business operations. Businesses are not covered for injuries that are caused by the intentional actions of the business and its management. This includes decision-making or neglect by the business to operate the way in which they do business in safe conditions.
As time has passed and work environments have changed so has the opinion of many in the business community about the need for an exclusive remedy in todays’ business climate. A few states have removed workers compensation as a requirement for some types of businesses. A few other states have proposed the idea, but are still in a wait and see approach. At this time Texas and Oklahoma re the only states to implement what is referred to as an Opt-out program. This is a program where if the business qualifies they can elect not to carry coverage and provide an alternative to what most states give through the workers comp exchanges. Both have in place certain minimum standards that are similar to those standards required under most workers compensation systems. Opponents of these system frequently critique that there are very strict reporting policies put on the responsibility of the employee. In the system set forth by Oklahoma employees must report the injury to management within 24 hours or they may not be eligible for coverage. Most states are sitting in a wait and see approach and depending on the success or failure of these states will determine the future of the workers’ compensation system.