With insurance mistakes can be hidden for years until a claim arises. Then the error becomes obvious and expensive. One error we see often is when single owner or dual owned businesses voluntarily elect to trigger the executive officer exclusion on their workers comp insurance.
Most states require employers to purchase a workers compensation insurance policy to cover workers who are injured or made ill due to a workplace exposure. If you are an owner and executive officer of a company AND have only one or two executive officers you may exclude yourselves from coverage. Note however there are potential drawbacks to opting out that need to be seriously considered before you make your decision. Further each state has it’s own rules for when and how an executive officer may exclude themselves from coverage. What rules apply to you are contingent on where your company is domiciled and if you are a multi state risk which would be governed by NCCI.
Executive officers of a corporation are usually included for coverage under each state’s workers’ compensation laws unless they file for an exclusion from the policy. Partners and sole proprietors are generally exempt from coverage but may elect coverage under the workers compensation policy. For the NY State Statutes CLICK HERE.
Benefits of Workers’ Compensation Insurance for Executive Officers 
The benefits are the same for everyone covered under a commercial workers’ compensation policy, including officers. Workers compensation coverage pays benefits to workers injured on the job. These benefits include medical care, a portion of lost wages and permanent disability. It also provides death benefits to dependents of employees killed from a work-related accident.
A typical health insurance policy specifically excludes work-related injuries unless there is a rider attached to the policy that adds business coverage. Furthermore, health insurance does not cover disability the same way that workers’ compensation insurance does. Most times when we are invited into the business to assess how designed a companies insurance program is built we rarely ever see coordination between the corporate health insurance program and the workers compensation insurance program.
Why would an Executive Officer Exclusion opt out of workers’ compensation insurance?
Many executive officers and business owners make the following assumptions when opting out of workers’ compensation insurance:
- They assume that their medical insurance is enough to cover them in the event of an injury incurred at the workplace.
- They assume that they would never want to file a workers’ compensation claim against their own company, so they don’t see the need to pay premiums for a policy that they won’t use.
- They think they are saving alot of money off the workers compensation premium by excluding themselves.
Drawbacks for Executives Officers of Opting Out:
Even if an executive officer spends the majority of his or her time at a desk, there is still a risk of injury. And if an injury occurs, it’s likely that the officer’s health insurance policy will have an exclusion for work-related injuries. Without workers’ compensation insurance, the cost of treatment for those injuries would have to be paid for by the company, or come out of the pocket of the executive officer.
Opting out of workers’ compensation insurance may save money off the workers compensation premium, but it also transfers risk to the employer and to the corporate officer who chooses to opt out. The risk for injury is greater than you think. Many executive officers travel for work and travel to and from meetings. As an exmple if you are traveling in between meetings and injured in a car accident by a person who has little insurance who will pay your medical benefits and lost wages for recovery? The risk is much greater than most people realize which is why we rarely advise our clients to exclude themselves from workers compensation coverage.
Lastly there is usually an exclusion in the group health insurance for injuries caused at work which should be covered under workers compensation coverage. Rarely is this exclusion ever cooridnated between your health insurance broker and your workers compensation broker. Ultimately this cost will be absorbed by the executive officer sadly.
Additional Premium Charges
If an executive officer rejects coverage, he or she will most likely have to file a form with the state and/or the insurance provider prior to obtaining coverage for the rest of the company. In absence of this notification, the insurance provider will assume that the officer is electing coverage, and will charge him or her a premium. The premiums for executive officer coverage is usually less than a thousand dollars and has a maximum cap for highly compensated executive officers which differs by state.
Option to Self-insure
With self-insurance, a company can avoid paying workers’ compensation premiums by serving as its own carrier. The catch is that the company has to agree to post a bond or put money aside to pay for any claims that may occur. Each state has its own self-insurance requirements.
Consult Metropolitan Risk Advisory today by CLICKING HERE if you have questions with regard to covering an executive officer or any other workers compensation related question.
Photo by Christopher Gower on Unsplash 
