Teaming AD&D With WC

Adds Weight To Coverage

While industry in the United States is safer than ever before,accidents still occur. Some 15 American workers die on the job eachday, and U.S. businesses spend $171 billion a year on the financialcosts associated with occupational injury and illness, according toNational Jury Verdicts Review & Analysis.

This is especially costly to companies in hazardous fields, suchas energy, petrochemicals, chemical processing, mining, electricalutilities, construction, trucking and convenience stores. Riskmanagers in hazardous industries, however, can benefit in a numberof ways by supplementing their workers' compensation coverage withaccidental death and dismemberment.

A bonus to adding AD&D coverage to a workers' comp plan isthat it gives employees in hazardous industries greater coverage itusually is difficult for workers in hazardous industries to obtainAD&D coverage. An added benefit for employers is that havingAD&D coverage for workers in hazardous jobs may help keep downpremiums on a company's general liability policy.

Much is at stake for employers. Workers' comp no longer isenough to cover companies for extraordinarily costly lawsuits.Courts increasingly are allowing employees or their heirs to sue incases where it is alleged that the accident or cause of death wasdue to the company's negligence. And the awards could be largeenough to put a company's financial viability in danger.

In Washington State, for example, a jury recently awarded $17.5million to a man who lost both arms and was paralyzed aftertouching a 14,400-volt power line while installing a vinylbillboard.

In Western New York, a jury awarded $23.4 million to a rooferparalyzed in an on-the-job accident. In Minnesota, the family of afactory worker whose skull was crushed between a moving mechanicalarm and a conveyor belt was awarded $35 million. And the list goeson.

Because workers' comp may not provide enough coverage, employeesor their heirs often believe they have no option but to sue. InTexas, for example, the stated death benefit is only $6,000. Evenin states that require higher awards, workers' compensation seldomguarantees a family's financial security.

Some AD&D policies provide anywhere from $50,000 to $250,000on a no-fault basis. If a worker earns, say, $50,000 a year,$250,000 would represent five years' salary.

By offering AD&D products to clients, brokers can earn morerevenue without expending much additional time. And the wealth ofknowledge many brokers have of workers' comp can easily be utilizedin the AD&D realm.

All companies that operate in hazardous industries can benefitfrom adding AD&D to accompany workers' comp coverage, but it isespecially useful to medium-sized companies those with 500 to 1,000employees. Huge companies often outsource hazardous jobs tomidsized firms, or have general liability policies with wideumbrellas.

Due to regulatory complexities, AD&D policies may not beembedded in workers' comp coverage. Thus, service companies areprime candidates for the workers' comp and AD&D policies.Unlike multinational corporations, these midsized firms often can'tafford more expensive plans. Many don't have any benefit plans, andsome depend heavily on seasonal labor who are not eligible for suchplans, even if available.

To sum it up, brokers, underwriters, risk managers and employeescan all benefit when a property and casualty product workers' compis teamed with AD&D. The two go together naturally, and requirelittle extra time and effort on the part of the broker, and only aslightly greater expenditure by companies and organizations.

Ron Clarke is a vice president of A&H at AIG GlobalEnergy in New York. He can be contacted at [email protected].

Reproduced from National Underwriter Edition, April 19, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.