Head of WIRM, Hong Kong and Macau
The pandemic has posed a variety of challenges for employers and employees worldwide. One key issue to consider is how COVID-19 falls within the scope of protections afforded by the legislation in employees' compensation, also known as the Employees' Compensation Ordinance (‘ECO’).
Under the ECO, an employee is entitled to compensation for the following:
According to the ECO, an “accident” (which, in itself, is subject to numerous legal debate) at work has to take place in order for an employee to claim compensation for COVID-19 infection. This article presents the current trends on notifications and claims before diving deeper into issues concerning eligibility of an employee to receive compensation when he/she contracts COVID-19.
From 2020, Marsh Hong Kong has received over 1,000 COVID-19 claims notifications. Claims from the construction industry and non-governmental organisations (‘NGOs’) make up the majority. More than half of these claims are attributable to the recent Omicron wave.
For COVID-19 cases in 2020 and 2021, we observed that the general sick leave period ranged between one to two months. The loss of earning capacity, as assessed by the Labour Department, was not particularly high with the lowest at 0%. However, it must be noted that the information shared by the Department of Health has been limited due to the large number of reported cases and the government’s self-testing regime, and without a given proof of a sickness period, this poses challenges for claims processing. Hence, an infected employee is unlikely to obtain compensation after reporting to the Labour Department.
In these instances of failing to obtain compensation, only a few have started legal proceedings. In such proceedings, the typical argument for liability was the employers’ failure to notify the infected employee of close contact cases and insufficient communication on preventive risk controls and measures.
Another key observation is that, while COVID-19 does not fall under the occupational disease schedule specified in the ECO, the Labour Department has typically relied on Section 36 of the ECO in delivering its opinion. Regarding claims, we observed consent from insurers and employers’ in that they do not prefer an admission of employees’ compensation liability. Admission of liability is largely dependent on the Labour Department’s investigation results and available evidence, with the investigation typically taking six to nine months before the outcomes are known.
It is vital for companies to declare employee WFH and flexible working arrangements to insurers. Should a company fail to do so, their insurer may reserve the right to subrogate against the insured (i.e. legally pursue the employer) for losses arising from compensating an employee for an accident sustained while he/she is working from home. Under the ECO, an employee is eligible to claim work injury compensation while working from home as long as he/she satisfies the requirements under the Ordinance.
To avoid being subrogated against, companies must disclose all WFH and flexi-work arrangements on their employee’s compensation application in order for insurers to include a WFH/flexi-work policy extension and (possibly) apply a premium loading. The premium loading, if any, is applied because insurers regard working from home as typically carrying a higher risk exposure from an underwriting point of view, and the resulting extension will provide affirmative coverage for a work injury claim incurred whilst working from home.
That being said, we have seen certain insurers take different approaches, subject to case-by-case considerations. At times, the WFH extension will be offered on a conditional basis.
Given the above considerations, businesses are encouraged to establish a detailed flexi-work policy for declaration on EC applications even as the business environment returns to normalcy. The flexi-work policy should outline the rules, requirements, and guidance on remote working for employees to minimise disputes in the event of a claim.
According to Clause 4(g) in Section 5 of the ECO, an employee working overseas may be entitled to claim for compensation provided that such an assignment is “for the purposes of and in connection with” his/her employment in Hong Kong.
Often, insurers will provide an extension for employees temporarily working overseas under the EC policy to provide affirmative coverage. Employers are recommended to make a declaration to their insurers if their employees are scheduled or assigned to work outside of Hong Kong for an extended period of time (i.e. more than 180 days). The insurer shall reserve the right to apply premium loading due to higher exposure from a long duration stay at a foreign place of employment, depending on the country or territory of assignment.
What are the implications for COVID-19 high risk industries?
According to our observations in liaising with markets, the following industries are classified as ‘high risk’ groups by insurers:
For these high risk groups, a premium rate loading for the EC’s policy may possibly apply due to the perceived additional COVID-19 risk exposures associated with the industry, but the approach may vary among insurers. Underwriting considerations include (inter alia): overall loss of performance, adequacy of the safety control plan, length of business experience, and current rate adequacy to determine if premium loading is required.
Marsh’s consultancy teams (Marsh Advisory and Marsh Worker Injury Risk Management - WIRM®) are ready to advise enterprises on the best course of action to remain resilient and prepared for the next stage of the pandemic.
Marsh Advisory is on hand to help companies develop and implement tailored business continuity plans (BCPs) based on three key components: awareness, response and respond.
Protect staff, maintain a clean and safe workplace, adopt social distancing measures, as well as adaptable and flexible work arrangements.
Isolate suspected/confirmed cases; prevent contamination of other areas and transmission of virus to others; contact tracing; quarantine (if necessary).
Continue critical business value creation and supply chain processes (minimum operating levels); recover and resume; alternate and/or permanent workplace.
In addition, Marsh’s WIRM® team provides the following workshops to address loss prevention:
Head of WIRM, Hong Kong and Macau
Head of Sales, Hong Kong and Macau
Head of Claims Solutions, Advisory, Hong Kong and Macau