Ugly Truths

Workers’ compensation, family farms and employee injuries

Published online: Aug 08, 2018 Feature Amy Nesemeier, CEO, Agrasure Insurance
Viewed 531 time(s)

This article appears in the August/September 2018 issue of Sugar Producer.

My childhood playground was the farm. I’m lucky enough to say I was never involved in a truck or tractor rolling over, mower rolling into the ditch, appendages stuck in an auger or falling into the grain bin. However, I easily could have been.

My dad, however, is missing the tip of a finger; the combine managed to keep that little piece of him. It is a constant reminder of how easily you can forget about farm safety when you get comfortable with your duties.

Today, as the CEO of Agrasure, I’m still lucky enough to say I have a farm-related playground. What brings me to the pages in front of you today are farmers, their employees’ safety and how workers’ compensation coverage works to keep everyone physically and financially sound.

The “ugly truths” we discuss here may sound like a scare tactic in trying to get you to run out and buy workers’ compensation insurance. On the contrary, I am simply trying to bring awareness to an insurance protection that is often overlooked and thought of as unnecessary or too expensive. It is completely up to you to evaluate your situation and decide if you are comfortable with your current risk level. 

Each state has its own workers’ compensation laws. This article will focus only on Minnesota’s statutes. For information on other states’ regulations, please contact your local farm insurance agent.

 

Ugly Truth 1 (The ugliest truth of all)

Until you need it—and don’t have it—you don’t realize the risk you assumed.

Some farms are lucky enough to never have an injury; most are not. In 2016, according to the U.S. Department of Labor, Minnesota recorded 92 work-related fatal injuries in all industries. Of these, the agriculture industry came in first by accounting for 23 of those fatalities and the construction industry second with 15. Who would think that working on the farm could have more fatalities than the construction industry? The most common incident types resulting in fatalities are transportation, slips or falls, harmful substance exposure and intentional violence by a person or animal. 

In 2016, incidences of injury that do not result in death are showing an average of 6 incidents per 100 employees. These incidents range from a particle of dust in an eye to anything short of death.

 

Ugly Truth 2

Workers’ compensation is easily overlooked as necessary or mandatory as part of a farm liability package. With farm employee wages increasing annually, more and more farms are reaching the annual payroll levels that mandate having a workers’ compensation policy. Take the numbers to your insurance agent and verify you have appropriate protection in place.

 

Ugly Truth 3

Minnesota—and many states—have some exceptions specific to farmers regarding workers’ compensation coverage, and it can be confusing. The Minnesota statute may say you aren’t required to carry it, or that your liability coverage may be enough to avoid penalty; however, is that really in your best interest?

These ugly truths lead to some big questions, so let’s discuss a few of these further:

What are the mandated requirements? (Minn.§ Stat. 176.011)

  1. If your annual payroll is below $8,000, you are not required to carry a workers’ comp policy.
  1. If annual payroll is between $8,000 and $54,103 (state average annual wage), you are not required to carry workers’ comp if you have a farm liability policy that specifically endorses coverage for farm employees and the limits are at a minimum of $300,000 general liability and $5,000 in medical liability limits.
  2. If your annual payroll is over the state average annual wage (currently $54,103), it is mandatory to carry a workers’ compensation policy.  

Does everyone working for the farm have coverage with a policy?

Anyone working for the farm, regardless of employment status, wage rate or type of compensation, would have coverage with the policy. Minnesota workers’ compensation law (Minn.§ Stat. 176.041) does exempt coverage for the following employed persons and their spouses, parents or children (regardless of age or wage rate):

  1. An individual owner of a business (a sole proprietorship)
  2. Partners of a partnership
  3. Executive officers of a family farm corporation
  4. Managers of limited liability companies in which the LLC has:
    • 10 or fewer owners; or
    • Fewer than 22,880 hours of payroll in the previous calendar year;
    • If both are applicable, only managers who own at least 25 percent interest are excluded and must elect to be included.

What does a workers’ compensation policy cover?

  • Injuries or illnesses caused or made worse by work or the workplace.
    • Paid regardless of any fault of either the employer or employee.
    • Medical care related to the injury, including medications, if it is reasonable and necessary
    • Wage-loss benefits for two-thirds of total income loss
    • Benefits for permanent damage or loss of a body function or part 
    • Benefits to dependents if a worker dies due to a work injury
    • Burial benefit if a worker dies of a work injury
    • Vocational rehabilitation services if employee cannot return to his or her job or to the employer you had before your injury
    • Travel mileage to obtain medical treatment and/or for certain vocational rehabilitation activities.

What does a policy cost?

Workers’ compensation insurance policies are offered by numerous carriers and can be stand-alone policies or bundled with farm liability insurance. There are no minimums or maximums to the amount of payroll you insure. You will always insure your actual annual payroll. As an example: $50,000 annual payroll at $5 per $100 payroll equals an approximate $2,500 annual cost of the policy.

Workers’ comp is a coverage worth shopping around for. There are two resources I can advise to start shopping with:

1)      Local farm insurance agent

2)      Your beet cooperative; most have resources available in cooperation with an insurance pool. You do not need to be a shareholder with the cooperative to participate with the insurance pool.

Let’s get real. Imagine you hire a few temp truck drivers for harvest. One happens to be your neighbor looking for some quick extra income. He’s an experienced driver, but his truck is hit by a train at an unmarked crossing. He was close to death and is permanently disabled. His family no longer has his income or physical abilities.

  1. What happens if you are without a workers’ comp policy?
  • The employee’s family will have to sue you and/or your farm liability policy for medical expenses, permanent disability and loss of household income.
    • How far is your $5,000 medical payment liability limit going to go for this family? Even if the employee has health insurance, his policy likely won’t pay for a work-related injury.
    • How far will $300,000 in general liability go for the family? Part of the suing process is to deem you as liable. Are you liable for his error in judgment?
    • You may be subject to out-of-pocket claim costs, fines and penalties for not having workers’ comp coverage.
    • If deemed appropriate, you will be placed in the assigned risk pool for workers’ comp coverage. Rates in this pool are currently at over $9 per $100 of payroll.
    • Your policy will pay for all damages, regardless of whose fault the injury is.
    • A workers’ comp policy also releases you from a possible civil suit.
  1. What happens with a workers’ comp policy?

Analyze your risk. Decide your tolerance. Get a quote. Make an educated decision.