Unnecessary Insurance: A Sixty-Second Seminar in Workers’ Compensation Claims Handling

Let’s begin today’s blog with an easy question. Does your company own or lease any motor vehicles, including cars, trucks, vans or busses? Many businesses require employees to use company vehicles when working. Of course, we all know California law requires motor vehicles on a public roadway to be insured for liability. However, additional coverages can be purchased in case of collision or other damage, and to provide occupants with medical and uninsured/underinsured motorist (UM) coverage if so desired.

Should an employee be injured in an accident while using a company vehicle then workers’ compensation insurance comes into play to pay medical bills and disability benefits. With that said we can’t help but ask, “Why would an employer purchase a commercial vehicle policy that provides additional insurance for medical and uninsured/underinsured motorist coverage when their employees are already covered under workers’ compensation?” It’s unnecessary.

Although UM coverage is rather expensive, it also is optional and not required by law. It actually is a bit humorous when a company complains about the high cost of workers’ compensation insurance, only to go out and needlessly purchase expensive UM and medical coverage. Often this duplicative insurance goes unnoticed when purchased.

Uninsured Motorist insurance under a commercial policy typically provides $1 million coverage per vehicle, while the standard limit for medical coverage is $25,000, payable over and beyond workers’ compensation. To collect under a UM policy the occupant must be injured in an accident involving the covered vehicle where the opposing uninsured driver is at fault. As for medical insurance, it provides broad coverage to pay for medical expenses attributed to incidents occurring while entering, exiting or occupying a covered vehicle. Interestingly enough, medical insurance under the commercial policy can at times lead to some rather bizarre situations in a companion work comp claim. For example: If utilization review denies a requested surgical procedure, the claimant may choose to obtain the procedure anyway and have it paid for by medical coverage available under the commercial vehicle policy. Also, it is not uncommon for a work comp settlement to be handsomely supplemented by a large payment under the UM policy so graciously and needlessly provided by the employer.

Now for the ultimate frustration … under current law an employer is not allowed to subrogate or claim credit against any sums paid to injured workers under a UM policy. Subrogation and credit rights are allowed only against “third-party” recoveries. An employer, employee, and the UM insurance company are not third parties. They are first and second parties. Consequently, the appeals board ruled in Airborne Freight Corp. v. WCAB that subrogation and credit rights do not apply. Therefore, UM coverage is nothing more than just an expensive gift from the employer.

In conclusion, the only time we can understand why a company would purchase UM and medical insurance under a commercial vehicle policy is when non-employee drivers and occupants are allowed use of the vehicle. Otherwise, there is no need to buy extra insurance when workers’ compensation already covers the exposure. Perhaps it is time to talk to your insurance agent.