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Domestic Workers & Coverage Gaps

By on October 31, 2013

The U.S. Census Bureau estimates that there are 1.5 million domestic workers across the country. But a definitive count is nearly impossible since many of these workers are in the country illegally, and many collect income that goes unreported on taxes. Thus, this number may be on the low end. There are many insurance implications for homeowners in the hiring of domestic workers. So what are the chief homeowners coverage gaps associated with this exposure for the homeowner/employer?

Standard homeowners policies typically exclude bodily injury losses under the personal liability and medical payments sections to any persons eligible to receive any benefits voluntarily provided, or required to be provided, by an “insured” under the Workers Compensation Act. State workers compensation laws can vary on this requirement. In many states, domestic employees are not covered by the Act. However, in a number of states, employers of domestic employees are subject to the Act if they employ these workers for more than a specified number of hours per week or if the employee is paid more than a specified sum over a certain period of time. In two states — New Hampshire and New Jersey — not only are domestic employees covered under the Act, regardless of the pay or the number of hours worked, but all homeowners policies must provide workers compensation coverage for these workers.

Insurers and agents need to be aware of these laws for their clients who are apt to hire domestic workers. For example, assume John and Mary Wilson, residents of the wealthy suburb of Chevy Chase, Maryland, directly employ a domestic worker who works 8 hours every Monday at $12 per hour. The worker, who has no health insurance, suffers a serious head injury when she falls from a ladder she is using to clean the top shelf of a bookcase at the Wilsons’ home.

Assume further that the Wilsons have a homeowners policy but no workers compensation policy for this worker. Maryland law stipulates that domestic workers who earn less than $1,000 per quarter are excluded from the Act but the worker in this loss scenario earns about $1,200 per quarter. Thus, the Wilsons are required by law to procure workers compensation for this worker. The Wilsons’ homeowners policy, however, excludes bodily injury to domestic employees if the insured is required to procure workers compensation (which is the case in this example). As a result of this serious injury, the domestic worker’s husband files a lawsuit against the Wilsons. Unfortunately, the Wilsons are now looking at a huge coverage gap.

So the best advice is to be aware of the workers compensation laws concerning domestics in your state.

Article contributed by Chuck Hanson, Anchor Insurance Group

Image Courtesy of StockFreeImages.com

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