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Mark Tarpinian, CLU, ChFC
Licensed Insurance Counselor
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Michigan Workers Comp 101: Definitions & History

Have you asked yourself "What is workers compensation?" "What is it not?" or "How does it relate to my business?" I'd like to answer these questions in this blog series and give ideas for work place safety measures that decrease the risk of injuries and save employers on their workers compensation insurance costs.

What Precisely is Workers Comp?

Workers' Compensation is the system Michigan uses to provide medical, wage replacement, and rehabilitation benefits to men and women who are injured at work or suffer from work related diseases. By law, employers in Michigan are to provide compensation to workers for disability or death as a result of work related injuries or diseases. These benefits are paid directly by employers or through their workers comp insurance carriers. Do not confuse them with other government provided benefits such as state and/or federal unemployment compensation, or with other types of group or individual hospital, medical, disability, or accident insurances. Michigan workers compensation is a statutory system, established by law, subject to subsequent changes and amendments, administered by the Michigan Department of Licensing and Regulatory Affairs, and interpreted by the courts.

What Did Michigan Have Prior to its Current Worker's Comp Law?

Prior to 1912, a worker injured in the course of his or her employment could sue their employer in a civil or "tort" action, which was the same remedy available to a person injured under other circumstances. But this tort remedy had many difficulties and risks for both employees and employers. The workers shouldered a monumental burden of proof; it required a worker to prove that their injury resulted directly from employer negligence. This gave the employer three very important defenses. The Business could argue: 

-the worker was also negligent
the injury resulted from the negligence of a fellow worker
the worker knew the dangers involved in the job, thus assuming the risk 

Thus, under this regular tort system it was very difficult for workers to win litigation against their employers and receive compensation for their injuries and diseases. Oddly though, if and when they were able to win in court, they could receive virtually whatever damages a jury wanted to give them, making the employer’s liability unlimited.

When Did Michigan Take Action? 

In 1912 the great state of Michigan, along with most of the other states, passed and adopted a 
Worker's Disability Compensation Act (“The Act”). The new system it created might essentially be described as a no-fault arrangement under which a worker no longer had to prove an employer’s negligence, and accordingly eliminated the employer's three defenses (worker negligence, co-worker negligence, and assumed job risk). The intent of the law is to require employers to compensate workers for any work-related injury, regardless of any real or perceived fault by anyone - for the payment of compensation to employees sustaining personal injuries in the course of employment, or who suffer an occupational disease or disability that limits the employee’s wage earning ability. For Michigan employers, in return for this principally automatic liability, the Act limited the amount that a worker could recover in benefits. Workers are entitled only to the following:

-Wage loss benefits 
-The cost of medical treatment
-Rehabilitation services 
-Death Benefit 

Under the so-called old system, workers could try to recover for pain and suffering, loss of enjoyment of life, and any other civil damages that they might convince a jury to award. Under the Act, however, worker's compensation is limited to the three areas—wage loss, medical, and rehab—regardless of the severity or seriousness the injury. This made Michigan what some attorneys call a “wage loss” state. Benefits are payable in the event that a work injury causes a loss of wage earning and it’s potential. Michigan legislature has made many changes over the years, with some of the more important occurring in 1965, 
1969, 1982, 1985, and 1987.

More recently, on December 19, 2011, Governor Rick Snyder signed into law a number of changes to the Michigan Workers Compensation Act. These changes were intended to amend and update the Act to account for new opinions from the courts that were favorable to employers, as well as to take into consideration the technological advancements that have been made in medicine and health care.

With some exemptions, all Michigan employers and businesses (including lawn service and landscaping businesses) are subject to the Act. This goes for out-of-state employers if they are hiring and engaging Michigan residents.

Next: What are Michigan Workers Comp Benefits?
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