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if he does not accept. Such action on the part of the employer is called voluntary and to this extent the compensation law is a voluntary one. Thus a law may be either compulsory or elective as to the employments covered, and voluntary as to employments exempted. Furthermore, the employments referred to above are private employments. An act may be elective as to private but compulsory as to public employments. In fact, one-half of the elective compensation laws are compulsory as to public employees. Classification, however, is based exclusively upon private employments.
Distinction must also be made between the effective and theoretical
scope of an act. A compulsory compensation law may be limited in its scope, but at least all employees within this scope are covered, while an elective act may include all employments and yet fail to cover a large proportion of employees because of the employers' refusal to accept the provisions of the law.
Hereafter, unless otherwise specified, the theoretical scope of an act is meant, and when such expressions as 50 per cent of employees are "covered" by the act, or "affected" by the act, or "come under" the act, or are "subject to" the act, it is presumed that all employers in the State referred to have accepted the compensation provisions of the law. It is hoped that by thus defining the terms, ambiguity and confusion will be avoided, or at least minimized. The extent to which employers in elective States have actually accepted the law will be discussed in another connection.
Compensation laws may be classified upon different bases. As already noted, one method of classification is the division into compulsory and elective compensation laws, depending upon whether the compensation provisions are obligatory or optional. The requirements as to insurance constitute another basis for classification. On this basis the laws may be classified as compulsory, including all laws in which some form of insurance is required, or optional, including laws in which no insurance is required. Table 1 shows the compensation States grouped according to these two classifications.
TABLE 1.-COMPENSATION STATES CLASSIFIED ACCORDING TO WHETHER LAW IS COMPULSORY OR ELECTIVE.
1 In a decision rendered June 3, 1919, the United States Circuit Court of appeals held that the Porto Rican compensation law is compulsory (Camunas v. N. Y. & P. R. S. S. Co., 260 Fed., 40).
It will be noted that of the 45 compensation States 14 are compulsory and 31 are elective as to compensation provisions, while 39 are compulsory and 6 elective as to insurance requirements.
Very considerable differences appear in the methods provided by the laws of the 39 States in which insurance is obligatory. Thus the State may make provision for the carrying of such insurance, and require all employers coming under the act to avail themselves of such provision; or the State fund may simply offer one of alternative methods. Again, the State may refrain entirely from such action, but require insurance in private companies, stock or mutual; and lastly, self-insurance may be permitted, i. e., the carrying of the risk by the individual, subject to such safeguards as the law may prescribe.
Table 2 shows the groupings on the bases indicated:
TABLE 2.-COMPULSORY INSURANCE STATES, CLASSIFIED AS TO DIFFERENT KINDS OF INSURANCE ALLOWED.
1 Idaho permits self-insurance. However, employers who carry their own risk may insure in authorized guaranty companies.
2 The New Hampshire law requires employers accepting the act to furnish proof of solvency or give bond, but makes no other provision for insurance.
3 Ohio permits self-insurance, but all employers are required to contribute their proportionate share to the State insurance fund surplus.
Self-insurers required to contribute 4 per cent of their premium to commission's maintenance fund. 5 West Virginia has practically an exclusive State insurance system. Self-insurance is allowed, but employers desiring to carry their own risk must contribute their proportionate share to the administrative expenses of the law.
Broadly speaking, the laws may be divided into four main groups or combination of groups, namely: (1) Exclusive State fund, (2) competitive State fund, (3) private insurance, either stock or mutual, and (4) self-insurance or where employers are permitted to carry their own risk. In most cases the employers have the option of several kinds of insurance. This does not hold true, however, of the States having strictly exclusive systems. In these cases no other form of insurance is permitted.
It will be noted that six States have such exclusive systems. two of these, Nevada and Oregon, compensation is elective and
insurance is therefore not absolutely compulsory, since employers need not accept the act, but should they accept, insurance in the State fund is compulsory. In North Dakota, Washington, and Wyoming both compensation and insurance are compulsory. In these six States the State becomes the sole insurance carrier. It classifies the industries into groups according to hazard, fixes and collects premiums, adjudicates claims, and pays compensation. Two other States (Ohio and West Virginia) are nearly exclusive in character. They allow no private casualty company to operate, but permit self-insurance. Ohio permits employers to carry their own risk, though all such employers are required to contribute their proportionate share to the State insurance fund surplus. Self-insurers, however, are not permitted to insure their risk in private companies. West Virginia has practically an exclusive State insurance system. It permits no private insurance, but does allow self-insurance. The employers, however, who desire to carry their own risk must contribute their proportionate share to the administrative expenses of the law.
In the other 31 States having compulsory insurance laws some form of competition exists, or at least the employer is given an option as to the method of insuring his risk. In nine of these States 33 the laws provide for a State fund through which the State conducts a workmen's compensation insurance business in competition with private liability companies. Private casualty companies, however, are permitted to write compensation insurance in all of these States. Idaho differs somewhat from the other States having competitive State funds. It allows employers to carry their own risk and also permits substitute insurance schemes if the benefits provided equal those of the act. Self-insurers, however, as evidence of satisfactory security, may furnish a surety bond or guaranty contract with any authorized surety or guaranty company. Moreover, the attorney general has held that the words "guaranty contract" includes insurance contracts and consequently self-insured employers may transfer their compensation liability to authorized private casualty companies.
Three States 34 have so-called State mutual insurance companies. Massachusetts was the first State to provide for this type of insurance. The original purpose was to create an insurance monopoly conducted by an employers' mutual company and supervised by the State. Before the law was finally enacted, however, private companies were given practically the same privileges as the so-called State company, which at present is a regular competing private mutual company. The other two States merely copied the provi
53 California, Colorado, Idaho, Maryland, Michigan, Montana, New York, Pennsylvania, and Utah. 34 Kentucky, Massachusetts, and Texas.