Officer Exclusions in Workers’ Compensation

I’ve noticed that most prospective workers’ comp clients who contact me have the officers of the corporation or the business owner excluded under their workers’ compensation coverage. I would like to make two cases against this practice.

#1 If an officer is excluded from work comp, it means exactly that, they are excluded from any coverage it may afford. If they are injured on the job, the insuring work comp company will not pay any medical or indemnity on that particular act. What I usually hear is “I have medical insurance and I am never going to make a claim against myself, so why pay workers compensation premiums on me or my partners or shareholding officers?”.

Let me tell you why you should. California is what is known as a “Exclusive Remedy” state (California Labor Code 3602 (a)), which means that your only remedy for benefits being paid arising out of a work related injury or illness is Workers’ Compensation coverage. This is not a suggestion, it is a law. If you have your standard health insurance coverage in the state of California, please pull out your policy and go to your “Evidence of Coverage” (EOC) section of the policy. Nearly every one that I have seen states something along these lines: “We will not pay for coverage when the injury or disease is Work-Related. Work-related conditions if benefits are recovered or can be recovered, either by adjudication, settlement or otherwise, under any workers’ compensation, employers liability law or occupational disease law, even if you do not claim those benefits.” So, whether or not you claim or exclude yourself on your workers’ compensation policy, the Health carriers have the right to deny coverage based on the fact that it was a work related injury or illness.

So basically, if you are injured at work (whether driving to a vendor, bank, or client’s operation, or maybe showing an employee how a particular tool works in the shop) there is no coverage afforded for that injury under your health policy. Some would say, “Well, I’ve done this in the past and never had an issue with my health carrier paying the claims” — but in reality there are now many documented cases where health carriers are denying benefits to owners or officers that elected to exclude themselves. Most of these include large losses or burns and disfigurements that will run up millions of dollars in extended care. So why gamble?

#2 Workers’ Compensation is the cheapest form of Death and Disability Insurance that I know of. That and the fact that it has no limit on medical care, should be enough, in its own right, to make the decision to cover yourself under your workers’ compensation plan.

Owners and officers salaries are usually classified under the 8810 clerical class code, that usually runs between .50 cents and $1 per hundred of payroll. In California, for premium calculation purposes, the salaries of officers or owners are capped at (2012) $104,000. So if we do some math using say a mean of .75 cents as the clerical rate ($104,000 X .0075 = $780), you would pay a total of $780 a year for a Disability policy with unlimited medical care and a death benefit. Less if you have an experience modification below 100.

So if your broker has advised you that you will never make a claim against yourself, please take a pause, and contact me so I can outline how this and other rules effect your eligibility for coverage in this instance. This is also an excellent reason to have your workers’ compensation and health coverages with the same broker. I will outline a couple of more reasons why it is good to have both through the same provider in my next blog.

If you would like to discuss this, be sure to contact me through our website at www.vanbeurden.com or email me directly at guyt@vanbeurden.com .